Jerry Kline is the kind of guy who loves to promote people who work for him, but he also likes to hire new people into those positions. It sounds contradictory, but not to Kline, chairman and CEO of Innovative Interfaces Inc. Kline, who built the $70 million integrated library system company from the ground up, appreciates the history his current employees carry, but he also understands that new employees can bring fresh ideas to the table. By working hard to retain a large core of employees while occasionally peppering the mix with fresh faces, he keeps his 310 employees motivated with a path to promotion while working to carve out new challenges. Smart Business spoke with Kline about how to balance your hiring system and why sometimes you just have to let someone go.
Balance the hiring of internal and external people.
I believe in hiring from within where we can. We’ve been able to retain bright people, keep them motivated and give them a path. In our industry, where we are evolving, having the history and knowing why we made past decisions is very helpful.
But it’s also important to bring people in from the outside for fresh ideas. Just because we’ve been doing things a certain way doesn’t mean it’s the best way to go forward. So both are important.
When you’re looking at each situation, we can always bring in people from the outside, so if there is a chance someone can step up internally, we tend to default to that. If we see there is someone who clearly can do the job or deserves a chance to do it, then that’s what we do.
Seeing that there are people who have been here a long time sets an example for everyone. I see way too much turnover in IT companies, and as a customer to other IT companies, seeing new reps and policies all the time can be really disruptive. From that angle, retention and consistency are important.
Still, sometimes we have to bring in somebody new because there is no clear-cut inner hire and that’s when we do it. So start by asking the question, ‘Is there somebody within the organization that fits this job so we don’t have to train someone?
Hire for retention. We’re looking for people who want to be here for a while. We are looking for people who are not trying to do a hit-and-run.
You have to look at their history have they always bounced around every two years or had they been somewhere a long time, and then maybe hit a few situations where it wasn’t working? We have a lot of people here who are perceptive and can understand that you look at people’s situations and figure out what they’re likely to do. For example, are they tied to the area, or are they just moving in and moving out?
I learn things about this company every day, so certainly somebody who has been here for a year is still at a point where they are learning a heck of a lot. Somebody that’s been here two years is just starting to really give us the return, so if they’re jumping ship that quickly, that’s not so great.
Go ahead and delegate. The challenge for me was learning where I should stay involved and where I bring the right people in to let them go. Going from a one-person, two-person, 10-person company to 300-plus employees, you find out that if you’re going to lead, it has to be a different kind of leadership.
In most places, I turn things over to people who can run the day-to-day operations without me, and I get more involved in areas where I can make a difference. You can’t do everything when you’re mediumsized, and when you’re coming from somewhere where you were very small, you probably did do everything.
But you learn from your mistakes, you learn that if you are going to be directing every decision, then every decision is going to come to you, and your directors will start turning to you for everything, and you don’t want that and can’t do it, frankly. You learn that if you’re going to grow, you need to turn over the leadership on a lot of things to other people and, even if it’s not exactly as you would do, you have trust in them.
Set the standard for your employees. I’m actively involved in the company every day, talking with our employees and customers, and that keeps me knowledgeable about what is going on.
My interest, excitement and passion for what we are doing helps keep them motivated. It lets them know that this is interesting stuff, it’s applicable and touches many people. Showing that enthusiasm for what we do, and coming in and talking to customers and talking to the staff here, makes me knowledgeable to a deep level where I can talk about where we’re going, and that helps.
Have front-line employees help you evolve.
Talking to your people that are out-front every day is important, I don’t know a better way to keep on top of it. Having working executives here in the office as my decision-makers the ones who are talking to our customers on a day-to-day basis and allowing them to shape our direction based on those conversations is really important.
I watch companies where decisions are made at a board of director’s level, where they may not even understand the business, and that’s one way to go, but I don’t think it’s the best way.
Having the people who are making these decisions working here every day, saying, ‘This is going to work for the next while, but we need something new next year,’ and trying to make those decisions of what we can start changing next month, that’s the key to staying ahead. It’s more than sitting down and talking at a high level about where the company needs to be in five years; it’s knowing that the company needs to be different every year and, even without knowing exactly what that means, having those people in the front in positions where they can quickly make the decisions when they see what changes have to be made.
HOW TO REACH: Innovative Interfaces Inc., (510) 655-6200 or www.iii.com
Bergeron, the chairman and CEO of VeriFone Holdings Inc., a provider of secure electronic payment technology and services, isn’t fazed by the comparison. He’s not reckless; he’s just intentionally decisive and swift in his actions, something he sees as a necessity when a company is in trouble.
“There’s never been a time where I think that I made a mistake as a result of moving too quickly,” he says. “In the situations that I’ve studied, there were more instances of risk being associated with CEOs moving too slowly as opposed to moving too quickly.”
Bergeron spearheaded the buyout of VeriFone in July 2001, then a division of Hewlett-Packard. What he took over was a company that had a lot of problems to solve. VeriFone had a fiscal 2001 net loss of $63.8 million and was dysfunctional in more ways than one.
The culture was inefficient and wasn’t driving innovation. The centralized command structure was cumbersome and slow, and the staff was not performance driven. As part of behemoth HP, the company wasn’t acting like the nimble tech firm it needed to be to survive.
Bergeron was quoted at the time as saying: “They gummed it up with HP bureaucracy and sucked the entrepreneurial oxygen out of it.”
And if it took a bull in a china shop to fix it, Bergeron was willing to break a few things to put VeriFone back on the path to profitability.
Make quick decisions
During the four-month financial due diligence period preceding the acquisition, Bergeron made his assessment of VeriFone, its staff and its culture, forming his own opinions as to the reasons behind its poor financial performance. The assessment period allowed Bergeron to get a jump start on the turnaround when he fired 550 people on the second day following the buyout, launching a cultural shift in the organization and immediately improving the bottom line through cost reduction.
“People were absolutely paralyzed,” Bergeron says. “Having a meeting was a placebo for taking action. Everybody had an opinion, and everything was a community decision. The staff spent most of their time building consensus and little time taking action. The impression that I got was that all staff members were equal because everybody sat in a cube and there wasn’t a leader of anything. It was a socialistic approach to the marketplace, characterized by a lack of product innovation and excess costs.”
VeriFone had 1,350 people on staff at the time of the acquisition, which not only represented more overhead than the firm’s revenue could support, the large staff was contributing to the organization’s process-driven business style, which yielded slow decisions and killed innovation.
“Turnarounds require fast and immediate action,” Bergeron says. “You have to accept the fact that you may not be 100 percent correct about the quick decisions that you make regarding which people to keep but not taking action on poor performers will lead to true mediocrity. Sometimes leaders, particularly in North America, think that they are better off with the devil they know versus the devil they don’t know, so they’re afraid to take action or worse yet, they move poor performers into other positions. The employees are witness to your tolerance for poor performance and soon the entire organization slows down.”
Bergeron initially asked all of VeriFone’s existing managers to evaluate their teams and supply him with a list of proposed staff reductions. To complete his staff assessments, Bergeron interviewed the key managers in the existing organization and came to the conclusion that the entire senior leadership team needed to be replaced.
“While I did a lot of interviews during the first four months, the decision was clear once I completed my assessment of the senior managers and asked them for their lists of employees who should be terminated,” Bergeron says. “If you were a loser on a loser’s list, I really didn’t need to dig any further to find the answer as to who should be released.
“I know that some people may characterize my position as uncaring and dismissive, but the fact is that in order to move forward, you have to make your cuts swiftly. By the third day after the acquisition, it was all behind us, and we were ready to go forward. Making quick decisive cuts is the difference between trying to orchestrate a revolution as a CEO and a shift.”
After the initial personnel reduction, Bergeron says that he reorganized the company into smaller, more manageable business entities and dispersed those business units around the globe. Bergeron’s reasoning for the move is that he believes in driving the business from the field, not from the headquarters. VeriFone’s numbers not only reflect his philosophy, but they also validate its effectiveness. Two-thirds of VeriFone’s employees are located outside the U.S in field-based business units that allow the staff to work directly with the firm’s global customers. The firm increased its revenue in 2006 by 22 percent in Europe and 57 percent in Latin America compared to 2005.
“I reorganized the organization into smaller, more manageable entities run by a local manager,” Bergeron says. “I give that P&L owner full control, and I don’t get in their way. I hire very strong managers to run the business, but I don’t own the responsibility, they do. I’m always coaching and sharing with them, but we’ll never get to be a $2 billion organization unless the managers around the globe own the responsibility for the results and perform.”
Bergeron acknowledges that companies need some processes and infrastructure, such as IT, human resources and back-office accounting functions, in order to sustain growth. But he characterizes those as the support functions for the organization not the units that drive the business. Only 50 employees are housed in the firm’s headquarters in San Jose, which includes the executive staff and leaders who oversee a dispersed group of employees who perform support functions but those support employees are embedded in each business unit. Besides fostering growth, having a lean headquarters staff keeps bureaucracy and slow decision-making from creeping back into the company’s culture.
In addition to frequent e-mails and weekly conference calls, Bergeron keeps his arms around the operation by holding meetings on a quarterly basis that include regional sales managers and key senior management attendees from critical organizations, such as engineering, supply chain, finance, marketing and HR. Status on business initiatives and sales results are typically discussed along with longer-term project needs.
“The key to managing strong people who are dispersed globally is frequent communications,” Bergeron says. “I spend a fair amount of time reviewing data, and I’m always talking to the top influencers in the company. The key is consistently communicating the strategy so everyone’s on the same page.”
Bergeron says that creating a high-performance culture attracts high-achieving employees. In the Silicon Valley’s ultracompetitive recruiting market, Bergeron says that VeriFone hasn’t had to steal top performers from other firms. He says that top performers have been attracted to VeriFone because it’s a fun place to work. Since making his staff cuts early on, VeriFone has grown both organically and through acquisitions increasing its employees to 2,500. He augments the environment through above-average pay and internal growth opportunities.
“Our total compensation is in the top 25th percentile for our industry group,” Bergeron says. “We have a feel-good environment, and most people work remotely so it’s nice to not wake up to an alarm clock every day. The prior CEO was always flying around closing deals, and the idea of hitting a sales quota was merely a suggestion. Top achievers want to be in an environment where they can accomplish and be recognized for those accomplishments. When people know that they’re being measured and what they’re being measured on, they’ll perform. If people don’t perform, you have to get rid of them.”
Bergeron says that the feel-good work environment at VeriFone not only attracts employees who seek accountability for results, it retains them. The company averages a voluntary turnover rate of less than 15 percent annually, which is among one of the best rates for a Silicon Valley tech firm.
With so much recent success, the company has created its own positive vibes in the recruiting marketplace. About half of the company’s work force receives stock options, and with the escalation in the stock price, those employees have received substantial financial rewards for their contributions. In addition, Bergeron favors promoting employees from within the organization.
“People want to feel that their contributions are valued, so we always look first to make promotions from within the organization,” Bergeron says. “You have to think about what kind of message you’re sending as the CEO if you don’t consider your own employees first for any new opportunities.”
Given Bergeron’s disdain for processes, there’s no formal structure for engendering internal promotions at VeriFone. However, Bergeron has demonstrated his beliefs through example by promoting more than nine senior executives from within the ranks, including the chief information officer, three general mangers and four vice presidents.
The results leave no doubt that Bergeron has accomplished a great deal since taking over VeriFone. In the six years since the acquisition, the company has become the leader in the secure electronic payment technology and services industry. Its net revenue was $581 million in 2006, and it posted a net income of $59.5 million. Along the way, both company profits and the stock price have soared, generating a huge payback for all investors, including Bergeron and many of the company’s key employees.
Bergeron points to innovation and new product development as well as several strategic acquisitions that have been byproducts of the corporate culture and significant contributors to the company’s market leadership position. But overall, it’s his energy and rapid decision-making that’s given velocity to the business growth.
“We’ve grown so fast so quickly, it’s important that employees across the globe hear the same consistency in our message and our strategy so you have to be out in front of people,” Bergeron says. “CEOs often shirk that responsibility, but it’s important to demonstrate a level of competent caring and an energy level for the direction of the organization, the only way to do that is by getting out in front of the employees.”
As the company moved from turnaround mode to growth mode, he has stuck to the same basic principles to move VeriFone forward.
“Our first acquisition was ourselves, and since then, we’ve made three more,” Bergeron says. “It’s really added to our earnings per share because we’ve looked for acquisitions that have complementary distribution channels or technology that we need, and it makes sense to make the acquisition because we don’t want to take two years playing catch-up by developing the technology capability in house.”
Bergeron says that he looks for similarities in culture between VeriFone and the firm he’s considering acquiring, and if he doesn’t find the acquisition to be merely plug-and-play, he’s likely to discount the price knowing that he’ll be facing restaffing costs.
“First of all, the acquisition needs to be priced well or else it just doesn’t make sense,” Bergeron says. “Then you have to integrate the two companies immediately. You can’t soft pedal around it, so just go ahead and do it. You can’t really finesse the changes that you need to make because it’s not like you can put the acquisition through the sausage machine and it’s going to become a different firm.
“I would tell CEOs that if you have to replace everyone, do it. It eliminates the push back from those who are resistant, and life’s too short to put everyone through that especially those who can’t tolerate change. In the long run, you’re doing those people a favor and, hopefully, they’ll land on their feet.”
HOW TO REACH: VeriFone Holdings Inc., www.VeriFone.com
Employee benefit plans subject to the Employee Retirement Income Security Act (ERISA) with 100 or more eligible participants at the beginning of the plan year are generally required to have an annual audit. For some companies, though, this important function can be an afterthought that can later rise up to bite them.
“Many companies view these audits as a commodity,” says Paul O’Grady, partner-in-charge of the benefit plan practice group at Armanino McKenna LLP. “Prudent employers treat them not as a commodity but as an essential component of the organization’s process for monitoring its duties and responsibilities for its benefit plan under ERISA.”
The Department of Labor generally requires an audit for large plans (100 or more eligible participants at the beginning of the plan year). Although, in limited circumstances, small plans may also be subject to the audit requirement.
Smart Business spoke with O’Grady about how taking a proactive rather than a reactive approach to employee benefit audits can turn this required task into an integral part of an organization’s employee benefit oversight function.
What are the responsibilities of benefit plan sponsors?
The primary fiduciary responsibility of the plan sponsor is to run the plan solely in the best interests of the participants and to administer the plan for the exclusive purpose of providing benefits and paying plan expenses. This includes diversifying the plan’s investments to minimize the risk of large losses and carefully following the terms of the plan documents consistent with the provisions of ERISA. Fiduciaries who do not act in the best interests of plan participants can be personally liable to restore losses to the plan and/or to restore profits resulting from improper use of plan assets.
What does the audit encompass?
There are two types of benefit plan audits that can be performed under the current ERISA regulations. The first type, a limited-scope audit, requires that the plan investments be certified as to their completeness and accuracy by a trust company or similarly approved entity and allows the auditor to apply limited procedures to the plan investments. As a result of the limited testing of investments, a limited-scope audit provides less auditor assurance and is generally less expensive to perform than a full-scope audit.
A full-scope audit applies more extensive procedures to the plan investments and includes audit procedures relating to the existence, valuation and completeness of the investments. Plans that are required to file with the Securities and Exchange Commission generally, plans that offer employer securities as an investment option to the plan’s participants must perform a full-scope audit and must also file form 11K with the SEC.
What are the pitfalls of treating this audit as a commodity?
Companies may look to the low-cost provider to perform the audit. While cost is an important consideration, experience offering these types of audits, which are very specialized, is crucial and can proactively identify potential problem areas. The Employee Benefit Plan Audit Quality Center of the American Institute of Certified Public Accountants provides an auditor selection tool to help companies choose an auditor.
Plans can run into trouble in areas such as the timely remittance of participant contributions. Participant contributions must be remitted to the plan as soon as they can reasonably be segregated from the employer’s general assets and no later than the 15th business day of the month following the month of withholding. I’ve seen instances where sponsors have been required to remit amounts in the tens of thousands to restore lost earnings to the plan as a result of failing to remit participant contributions in a timely manner.
Additional pitfalls range from problems applying the definition of participant compensation, which impacts participant and employer contributions to the plan, to a lack of understanding surrounding the investment fees being charged to participants. I’ve seen companies pay fines as high as $50,000 per year for failure to comply with a plan’s operational requirements or for failing to administer the plan properly. Misunderstanding the application of these and other rules can become a costly oversight for a company.
How can companies mitigate issues before a benefit plan audit?
Companies should stay current and engaged with their third-party administrative service providers and plan auditor throughout the year to stay informed of problem areas and ongoing regulatory developments, such as the recently passed Pension Protection Act.
Companies can arrange for an operational review, which will take a look at the plan from an operational perspective and provide feedback covering items that need to be corrected. Companies can also utilize technical resources, such as the Department of Labor Web site and the Employee Benefit Plan Audit Quality Center, which are good means for staying current. Finally, plan sponsors should be receiving periodic training on the workings of these plans.
PAUL O’GRADY is partner-in-charge of the benefit practice group at Armanino McKenna LLP in San Ramon. Contact Paul at (925) 790-2766 or Paul.OGrady@amllp.com.
Emerging technologies in the banking sector, such as remote deposit capture services, enable companies to reduce costs while improving efficiencies.
The image capture solution allows businesses to scan checks at their office location and deposit them by transmitting an image file. By eliminating the need for delivery or mailing of paper items, transmitted deposits can enter the collection stream faster and with less effort, cost and risk than with traditional methods.
Customers taking advantage of this technology have longer processing hours as well as improved funds availability and deposit reporting all without leaving their office.
“Now is the ideal time to take advantage of the benefits that remote deposit capture has to offer,” says Joy Gilmer, senior vice president of treasury management for Comerica Bank’s Western Market. “As more and more banks are exchanging check images rather than paper checks, remote deposit capture puts a business in the right position to take advantage of the savings and convenience of image technology.”
Smart Business spoke with Gilmer about advances in banking technologies and the benefits that remote deposit capture provides to businesses.
How have advances in technology improved the ways that businesses can handle their banking needs?
Through technology, businesses are able to quickly communicate financial information to and from their financial institution. With the advent of remote deposit capture, companies are taking advantage of later deposit windows, better processing float, simplified deposit creation and better record-keeping.
How does the concept of remote deposit capture work?
The concept is simple. A scanner is installed at the company and customers access the Web-based application from their PC workstation or laptop. Checks are scanned and an electronic deposit ticket is created. Once the information is loaded into the deposit capture system, the information is transmitted to the bank and made available for deposit processing. Since it is data versus paper checks being delivered to the bank, processing/desk float and manual processing errors are reduced significantly. Remote deposit capture services have proven to be a significant value in disaster recovery plans. Recent fires in California, for example, caused road delays that impacted the ability to deliver paper checks to the bank. With remote deposit capture, there are no ties to commute-related issues.
In what ways can this function improve record-keeping?
Deposit information, including images of deposited checks and electronic deposit tickets, is stored and available for retrieval as needed. Having quick access to this information improves response time to customer inquiries and reduces research expense. The capture process gives a company the ability to update account receivables systems directly. Reports can be accessed from anywhere using the Internet.
How can utilizing remote deposit capture increase productivity while reducing costs?
Remote deposit capture enables a company to make deposits without the checks physically leaving the office, thus, reducing expense associated with time out of the office, courier services and/or third-party depository banks. Deposit preparation time is reduced as information is scanned versus keyed or written. With the recent enhancements in the marketplace to Web-based solutions, deposit capture functionality is improved even further. A company with multiple locations can review consolidated reports, perform research functions and approve transactions remotely from any location. A company can now utilize the convenience of browser-based remote deposit technology.
What role do you envision technology will play in the future for banking?
Technology will continue to play a significant role in the financial arena. The movement and management of financial transactions is a complex process. Timing of obtaining and reporting information is critical to the health of a business. Having the right systems in place to improve processes is necessary to the ever-changing needs of the financial community.
JOY GILMER is senior vice president of treasury management for Comerica Bank’s Western Market. For more information on deposit capture technology or Comerica Bank's Business Deposit Capture, you can reach her at (714) 435-3931 or firstname.lastname@example.org.
When Iain MacKenzie started at SMART Modular Technologies in 1997, he didn’t exactly get warm, fuzzy vibes from many of his colleagues. The company, which manufactures computer memory and liquid crystal display solutions, was successful, but its leadership regularly threw words at each other, swearing and yelling for all to hear.
“You did that wrong!”
These outbursts happened inside and outside the boardroom, and nobody cared who heard.
“It was ruthless, and as much as that feedback would happen immediately and openly, no matter whom was hearing, it would happen in front of my direct reports, so it was undermining the authority, and it’s a little bit belittling,” MacKenzie says.
As a Scotsman, MacKenzie came from an old-school background of respect and courtesy, so when he got the reins as president in 2002 and then also CEO in 2005, he knew he needed to change the culture and eliminate the dictatorship strategy if SMART Modular was going to succeed as it expanded globally.
“In a start-up environment when there’s no culture, no standard and there’s one person as the old hub in the middle of the spokes of wheels, you can be very successful in directing the traffic,” MacKenzie says. “When that runs out of steam, a global operation and a global business with multiple connections needs to live and sleep and breathe on its own.”
If MacKenzie was going to dismantle the company’s ruthless, centralized command structure and create an independent structure that would be more efficient in today’s market, then he was going to need a new team, a new vision and a new culture.
Creating a team
MacKenzie needed to get himself out of the hub of the operations, getting people to focus their attention outward rather than inward. He didn’t want everyone coming to him for answers, so he needed to push decision-making down through the organization, but that requires a team you can trust.
“The first thing is to find the people and set the guidelines,” he says.
He started by looking for people who can brainstorm, problem solve, communicate, and are trusted and respected. He also looks at how someone performs in a bad situation and if they solicit multiple inputs instead of relying on one person’s opinions.
“It’s a lot of questioning of how do you do that? How do you behave?” MacKenzie says. “It’s not asking what have you done and why were you successful. It’s more saying what would you do in these circumstances and how do you deal with these situations.”
He says the key is taking your time and not hiring too fast. Once you have the right people in place, then you can start setting guidelines and expectations for how they should perform.
MacKenzie emphasizes their decision-making authority to make sure his reports are clear on what they need to be doing.
“You have the ability to make any decision you like, but you just need to stand by that decision upon measurement,” he says. “Typically, because of time differences [SMART has 11 locations across the globe], you cannot ask me on a daily basis. The worst thing to do is to not make the decision, so you have to make the local decision.
“You know your rules, and you have the lead. You have the A-plus. You have the job. You have my trust and respect it’s yours to lose. That puts a huge ownership and responsibility and accountability onto the person on the other side.”
Setting and selling a vision
MacKenzie needed a new vision for the company that would serve as the guiding principles for all the managers. The key to creating a vision that everyone can get excited about is getting everyone involved.
He shows his team the goals they should hit based on growth expectations and asks them to brainstorm ways to achieve those numbers. They then research those ideas and ultimately choose the top 10 ways to get there, including how everyone will be rewarded.
“It’s almost like an acquisition you think about the amount of work people put into acquisitions and diligence and what’s the direction and the market, what’s the IP, what’s the differentiator, why would you be successful, and what price point could you sell that at,” MacKenzie says.
The goals are reviewed and tweaked each quarter, but the larger goals guide daily decisions.
“It’s pushing and jiving on a daily basis,” MacKenzie says. “In any one week, I’ll say, ‘This is the goal; does that help us get there, or is it inconsequential?’ It’s just constant focus, and every manager making that decision on, ‘Is this helping us get to our goal, or is this noise, or do I need that?’ That assessment just keeps it driven.”
It’s also important to welcome feedback from employees about decisions and progress.
“You want to be clear and clinically clean on your goals, but you want to keep listening and be careful because a dictatorship does-n’t welcome input,” MacKenzie says. “When the style is all trust, respect, soft empowerment, open door ... that sets it open to get the feedback ‘I thought you said this, but it doesn’t look like we’re going that direction,’ so there are tentacles out there to get the communication to come back.
“If someone can get on board and believe that where you’re painting the picture of where you want to go is a good thing, and we believe that’s success, then watch everyone get aligned. You don’t have to define the road to within 2 inches. You define, ‘We’ll go northeast. It’s on the hill over there. Let’s go.’ You don’t have to control the exact how you do something. You don’t have to say, ‘Don’t make that step to the side; make that step forward.’ If you don’t focus on the little pieces, the people know that they can do the little pieces on their own.”
Despite your best efforts, some will still resist, and MacKenzie says you have to set parameters for changes and address people who aren’t working within them.
“If there are real negative influences, you draw it to their attention, you ask for repair,” he says. “If that can’t fix it, then you need to agree to part.”
MacKenzie says you can’t wait forever for people to get on board. Someone may have a ton of great attributes, but if they can’t improve the things that are holding them and the team back, and it’s been more than a year, then you have to remove them.
“If the goal is for 10 people to run a 400-yard relay, and the team who wins is the team that gets all 10 across the line, what happens if one person dawdles and says, ‘I don’t care if we win or not.’” MacKenzie says. “The other nine can work as hard as they like, but if that one person doesn’t run, they lose the game.
“It’s so disappointing for the nine who ran that whole race in 10 seconds, and one person is wandering along eating a banana and says, ‘I don’t care.’ How would you get the nine people to run the next race without taking the one person out and saying, ‘Look, you’re not part of the race; I’m going to replace you.’ So for the good of the nine, you have to move forward.”
Building a new culture
MacKenzie wanted to get rid of the old oppressive environment and create a culture where people were excited to come to work every day.
“We must be successful, we must meet the business goals that’s the business piece,” MacKenzie says. “We must communicate and be open and have a style ... and get everyone on board, but there must be a reason not to wake up in the morning and go, ‘Ugh, I just don’t want to go to work.”
MacKenzie put in pool tables, ping pong tables and dart boards for people to use, and one day he bought 60 pizzas and let employees challenge him in table tennis. Having an environment that promotes fun helps people feel excited to achieve goals.
“You don’t have to pay as much attention to the smaller items,” MacKenzie says. “It makes people more motivated to succeed and less sidetracked to whine and moan to each other in the corridor. More of the engagement will be about what we need to do and what we need to fix as opposed to misery loves company and isn’t this terrible ... It focuses people better toward the goals and keeps them on track.”
As part of fixing the overall cultural tone, MacKenzie also evaluates people not just on completing their tasks but also their attitude.
“It has to be measured,” MacKenzie says. “It’s a very strange thing to give a goal to say, ‘OK, your goal is you must have fun,’ and it’s difficult to say, ‘You must smile today,’ but it cannot be HR’s responsibility. It has to be something that you want to create and is enjoyable.”
You must reward people based on those expectations in order for them to be effective.
“The management team first of all has to agree that they’re going to concentrate on it, and it’s going to be part of the measurement system,” MacKenzie says. “Where all of it fails is if you pay 100 percent of your reward for meeting the goal. ‘The goal was 10; you made 10. You get 100 percent, but, by the way, I didn’t like how you did this.’ That will fail.
“You met the job. You got a 10. That was excellent. You now have a score of seven because you messed up those people because you’ve given them no respect, no regard and you were a grump. That’s more important, so you’ve got to set it, as a management system, something that’s meaningful, and it has to be rewarded upon.”
You also need to take the time to show employees that you really care about them. You can take all the time hiring, creating a plan and getting buy-in, but if you don’t build relationships with employees, it’s hard to succeed.
“The relationship is deep, and relationships and motivation and the fun and the engagement and knowledge of people is important,” MacKenzie says. “I’m interested in people. It’s getting all the aspects of being a friend, a confidant, a decision-maker it’s that fairness measure that really gives us a base of trust and respect that they can do a good job.”
MacKenzie requires his managers to report to him what’s going on with people.
“My managers are programmed I must know about births, deaths, marriages, affairs, new houses, new cars ... It’s important,” MacKenzie says. “I get irked if someone has had an illness or something major in their life, and I don’t know about it. It’s not a pretend management style, I physically feel irked, and I reach out to that person.”
When one employee was battling tongue cancer, MacKenzie’s team continuously phoned him and checked on his family. He recently received a letter from the man thanking him for his support.
It’s all part of the new culture that will help the company become a more efficient global organization.
MacKenzie says if he hadn’t created a better culture at SMART, not only would his managers probably have had heart attacks, but he would not have been able to grow SMART’s net sales to $707.4 million in fiscal 2006, a 16 percent increase from fiscal 2005, and the company is projecting at least $823 million for fiscal 2007.
“It was fairly aggressive, fairly dictatorial, fairly centralized decision-making management when I took over, and I think now it would be measured as each person has to pull their own weight,” MacKenzie says. “They have the responsibility to do the job. They know they have an ear. We can change direction, and it is trusted and respected.”
HOW TO REACH: SMART Modular Technologies, (510) 623-1231 or www.smartmodular.com
In today’s fast-paced business environment, the need to secure credit approval for merchandise purchases or services in a timely fashion has never been greater. Unfortunately, for many companies, the process of working with vendors, suppliers, financial institutions and other creditors can be a slow and arduous task.
In order to speed up the credit approval process, Comerica is offering services called credit mitigation tools.
The portfolio of services has a number of benefits, says Syd Saperstein, senior vice president, division manager of Comerica’s Special Corporate Financial Services Division. “Companies using this service can increase their profitability, increase their market penetration and increase customer satisfaction,” he says.
Smart Business spoke with Saperstein about the importance of obtaining credit approval in a timely manner and how the process can be facilitated.
Why is it so important for companies to be able to obtain credit approval in a timely manner?
Fulfilling customer orders in a timely manner is critical to any good customer service position that retailers or wholesalers need to maintain. If they can’t get credit approval in a timely manner for the goods they would like to order, then their customers will not get the product in the time frame that they expect it.
How does the composition of the supply chain affect credit decisions?
Products in a supply chain may go through as many as five or six wholesalers and distributors before they get to a retailer. Manufacturers usually don’t sell direct to retailers or consumers. Manufacturers sell to distributors who sell to wholesalers who sell to regional wholesalers who sell to retailers who sell to consumers. Every step where goods change hands is a credit risk decision that is going to be made by credit managers or the policy of a particular company about how and when they want to be paid and whether they are going to ship goods before they’re paid.
What are some methods that can be used to facilitate the credit approval process?
We substitute a trustworthy payer in the middle of the distribution chain I just mentioned. Instead of a wholesaler/manufacturer/distributor having to decide how much to trust a customer with a net worth of say $250,000, we substitute the customer with the bank that has $58 billion in assets. We replace the risk that would have been assumed by the wholesaler/manufacturer/distributor by putting the bank in the place of the customer.
Of what does the credit mitigation tools portfolio of services consist?
The portfolio of services is devised to put reliance on the creditworthiness of the bank in place of the higher risk ‘promise to pay’ of the distributor or retailer. To put it into a consumer context, let’s say you want to purchase a product from an online Web site and it costs $350. You would supply your credit card or checking account number to that seller. The seller would immediately collect the money from your account. When the seller gets the money, it tells the wholesaler/manufacturer/distributor to drop ship those goods that you just bought.
If the Internet seller has a credit line with a supplier and hasn’t exceeded its allotted credit for the month, then the wholesaler/manufacturer/distributor will ship the goods within four to five days. The customer is happy, and the retailer is happy.
The wholesaler/manufacturer/distributor incurs a risk because it has a sale but does-n't have any money yet. It has to wait until the end of the month and see if the retailer is going to actually pay the bill. So there is a limitation on how much credit the supply chain will permit to the retailer. The credit mitigation tools portfolio addresses these concerns.
How can companies benefit from this service?
In addition to increasing profitability and market penetration, companies using this service can increase the depth of product availability because they will never be out of stock. They can increase the breadth of products that they can offer for sale because they will no longer have barriers that will keep them from being able to fulfill their orders. If they were buying only from those suppliers where they have established credit, they would not be able to buy enough variety. For example, they may only have four or five manufacturers who grant them the credit they need. Credit mitigation tools can reduce this risk. Also, companies will be able to speed up the turn of inventory to whatever the consumer-driven demand is.
SYD SAPERSTEIN is senior vice president, division manager of Comerica’s Special Corporate Financial Services Division. Reach him at (415) 477-3246 or email@example.com.
Acorporation must change in order to survive and thrive. Change will include process re-engineering, or the analysis of business processes with the goal of improving communication, methods and procedures to align with the organization’s needs.
“You need to have the mindset to revamp something you may have initially designed because now you can make it better with new information, new knowledge and new systems,” says David Davis, Risk Management Services partner, Armanino McKenna LLP. “Process re-engineering can suggest scrapping an entire process or uncovering simple solutions, like improved system and software training.”
Smart Business spoke with Davis about how process re-engineering can reveal improvements to core processes that ultimately produce tangible and intangible benefits for growing companies.
What size companies can benefit from process re-engineering?
What I’ve seen in my career is that companies with more than $25 million in revenue, and specifically those that have been growing, can benefit from engaging in process re-engineering. Growth companies need to reanalyze their processes on an ongoing basis instead of just adding more resources.
What core business processes should be analyzed?
Some areas that present problems for companies are inventory management and logistics and any department responsible for moving goods from one place to another or coordinating the receipt of products and services. There is always a ton of paperwork associated with these functions, which seems to bog down a lot of companies.
There are also other areas around manufacturing. For example, the management of raw materials that go into the process, the proper inventory of the finished goods and how that information is properly communicated internally so companies can more accurately record information that will better service customers in a timely manner.
Some additional processes to consider are how financial reporting integrates with other departments as well as budgeting and forecasting processes and performance analysis. How do you know you should be implementing changes, adding staff or considering a different vendor unless you are doing some type of analysis and forecasting about what’s going to happen to your business?
What gains should be expected from a re-engineering effort?
One area includes tangibles like hard cost savings from reduced shipping, reduced replacement costs, savings from head count improvements and cost reductions in manufacturing. There also are intangibles like improved communication within the company and the benefits from people better understanding what other workers do and how they do it. Communication is the biggest problem I see in companies today.
How are target processes identified?
Mapping is an important place to start. If a company doesn’t have their existing processes mapped so they understand what they can do, then they really need to do that. You can’t just come in and say, ‘Change this and change that,’ unless you understand the processes. If the company tells me they already have their processes mapped, then I strongly suggest that we walk through them to make sure they are accurate. Otherwise, wrong decisions can be made, or perhaps the process only needs a tweak here and there instead of throwing it out and starting from scratch.
Often, it’s just a training issue because people aren’t doing things the way the company first designed it. Chances are a large percentage of the people you trained when the process was first put in now have different jobs or are gone completely. One recommendation I always seem to end up making is for companies to get their people better training on the systems. Workers like to create spreadsheets and programs on the side, and they’re the only ones who know the information contained there. This slows down other people.
Can employees view re-engineering as invasive or threatening?
Sometimes there will be head count reductions, but that’s not always the goal of process re-engineering. Upon my initial engagement with a company, I tell the staff that my goal isn’t to eliminate jobs, but to make their jobs more efficient so that, as the company grows, they can do more but not have to work more. You’d be surprised how enthusiastic people get if they think it’s going to make their life better. It’s also important to get a company’s senior management behind the effort early on.
Should companies tap outside resources?
Many times it makes sense to bring in outside help. Consultants bring a different and more critical view than the insiders who may have originally designed a process. They’re not biased they come in, and if they see a problem, they tell management what they’ve uncovered.
DAVID DAVIS is a Risk Management Services partner with Armanino McKenna LLP in San Ramon. Contact David at (925) 790-2726 or David.Davis@amllp.com.
It happens one day, every week at every facility in the company. Copart Inc. employees gather together, each one wearing the company’s color blue in some part of his or her wardrobe, to start the company’s “Blue Day” with a song and cheer.
“Old McCopart had a car, ee-aye-ee-aye-oh!” one department sings.
“Row, row, row your car, gently down the stream. Merrily, merrily, merrily, merrily, Copart’s but a dream!” another department answers.
Each department sings the cheer it has come up with for the week, and while the cheering and singing lasts just a few minutes, the effects last well into the day and build bonds between employees.
“It’s amazing how it takes sadness out of people’s lives in the morning,” says Willis Johnson, Copart’s founder, chairman and CEO. “They come in, and they might be having a bad day or a bad yesterday or a bad morning, and they have to sing a song with everybody clapping, and they realize the world has not come to an end. There’s still some cheer in the world. Then they walk away, and they may not be happy all day, but their attitude’s a little bit better.”
It’s this kind of focus on the employees that has helped Johnson post impressive growth numbers at Copart, which sells salvaged vehicles for insurance companies. Copart ended fiscal 2006 at $528.6 million in revenue, which was a 57.6 percent increase from fiscal 2003.
“Whatever kind of CEO you are, you should always have in your mind what’s best for your employee, not always what’s best for the shareholder,” Johnson says. “The shareholder comes and leaves. The employee is always there. If you have a happy employee, and the company is doing good, then by osmosis, the shareholder wins.”
Johnson’s keys to creating a winning organization are well-defined values, caring for people and building relationships with his 2,500 employees.
“You might spend a lot of time with your family, but you’re eight or nine hours with the other people in that company, and you like and you care about them,” Johnson says. “People who work together for a long time, they start caring about the company family, and if it benefits one, it’s going to benefit them all. I think if you get that culture going, they all want to move forward and do good.”
When Johnson and his team set out to create the values for the company, they held a brainstorming session to generate ideas. But then they dug deeper to see what was truly important and what they were unnecessarily getting hung up on. He says evaluating what’s good for the company is just like evaluating a person.
“When you look at somebody, you always go to the right side and put all their good points on the right side and all the bad ones on the left,” Johnson says. “When your good ones outweigh your bad ones 75 to 25, you’re looking at a pretty good person there because people have some bad problems, but they have a lot of good stuff too.
“Don’t let a few little bad things outweigh the good side. Is this really peanuts we’re talking about, or are we talking about something big? Sometimes people let peanuts ruin an entire relationship because they have a hang-up here.”
Leaders could spend their time nitpicking every detail about the business, but when those peanuts fill you up, you don’t have room for the filet mignon.
For example, Johnson says he has some employees who don’t dress well, but he points out that it doesn’t affect their work, so he lets them do their job well and doesn’t pay attention to how poorly they dress.
“If you let the small things bother you with employees or the people you work with or the customer you do business with, you’re never going to get anywhere in life, so you just have to say, ‘This is how they are,’ and you have to live with it,” Johnson says.
Once the values were agreed on, Copart did what many companies do and included the new decrees in employees’ paychecks and had plaques made for all its locations, but the company also took a different approach. Copart had fun with it.
“We had contests and said, ‘We’ll meet you in the hallway. Can you tell us the values of the company?’” Johnson says.
Johnson and his team made the values simple by giving each letter of the company name a value that started with that letter, so people could easily remember them commitment, ownership, profitability, adaptable, relationships and trust.
Employees didn’t get prizes or incentives for knowing the values but just the break from the day helps build excitement, and the desire to be verbally recognized helps employees learn about what’s important to the company.
“It was just awareness that you’re a part of the company,” Johnson says. “You don’t always have to give people stuff. You just have to give them attention.”
Caring for your people
Many of Copart’s values deal with how the company interacts with and treats employees, and Johnson says caring for his people is one of his top priorities.
One of the basic strategies is providing salaries that are above industry averages.
“I’m a real employee person,” he says. “I hate for employees to quit and leave because they got a better-paying job.”
But salary and benefits are just the starting point. Copart employees also have the opportunity twice a year to purchase company stock at a 15 percent discount. If the stock price stays the same, they make a 15 percent return, but more often than not, they earn a higher return, and they can sell it or keep it as they see fit.
Johnson also helps pay for employees to go back to school. He also started a foundation that provides scholarships to the children of any Copart employee who has been with the company for at least two years. If an employee’s child earned at least a 3.0 grade point average, he or she could apply for $4,500 in scholarship money, and as long as he or she maintained that average, the child could reapply every year.
“It’s helping their kids, and when you help people’s kids, it’s like helping them,” he says.
He also has a system to look at internal candidates first for open positions.
“We’ll look at them before we would ever hire someone from the outside,” Johnson says. “We would look within the company first to make sure they have that opportunity before anybody else because they have a love affair with the company.”
To facilitate this process, employees fill out a form that allows them to express which positions they would be interested in, should any openings arise. When an opening does arise, Johnson can go to that database and see who has an expressed interest.
“They may just want to go from a forklift driver to a dispatcher,” Johnson says. “You don’t have to jump way to the top because some people don’t want to move, or they don’t want to take on responsibility, but they want a little bit better-paying job, so they’ll put their name in.”
Many people change jobs because their company was unaware that they wanted another opportunity. This system helps make management aware of who is interested in what opportunities so the managers can keep their people, which creates consistency and grows the business.
“One day, I will retire, and I’ll keep a lot of my stock in this company,” Johnson says. “I’ll probably never sell it off, and the employees I bring up the ranks and the employees that work in the field, they’re the people who are going to keep my family and the long-term investors in the company in a good position because they were trained right, and they understand how the leadership of this company was started and founded and wants to go forward.”
Johnson says the key to creating better programs for employees lies in talking to other leaders. He regularly meets with the CEOs of companies that he doesn’t compete with to brainstorm and just talk to them about how they do things, and several of the programs he has at Copart came from hearing what these other leaders did within their businesses.
“You need to meet with other peers in your industry not to make money, just to brainstorm what’s good for them and what’s good for you because you never know what somebody’s going to dream up,” he says.
One of Johnson’s executives leaves a meeting in Chicago and now has to get to a 2 p.m. meeting at another facility. He calls human resources and discovers that tomorrow is one employee’s birthday, another recently got married and one’s mother is sick in the hospital. He makes special note of these three people so he can talk to them personally when he arrives.
When he gets there, he shakes hands with every employee, and specifically engages the three people he noted and talks to them about their lives.
Johnson calls these visits “executive drop-ins” and requires them of all his management team members whenever they’re near one of the 124 Copart facilities. The individual attention shows employees that leaders care about them, and it makes them feel valued.
During drop-ins, executives also give a short speech to update the employees on how the company is doing, so they feel informed and know how their jobs affect the business.
“Give them an insight into what the company is doing and where it’s going,” Johnson says.
Even employees at the lowest levels are interested in how a company is performing. They are depending on the company for their livelihood, and they want to know if the company is healthy.
“When an executive tells him, ‘Hey, we just bought seven (salvage) yards in England, and we got this going and this going,’” Johnson says. “They become part of the company, and that’s what you have to do make them part of the company.”
Johnson says employees don’t want to have to worry about where the money is going to come from for their house or college tuition, so that information helps ease their minds and make them feel connected.
“They have to know they’re secure in a company that thinks and knows that we survive because of the employees who run the company,” he says. “They have to know that. You can’t just assume that people know that.”
HOW TO REACH: Copart Inc., www.copart.com
Employees are more effective when they understand the business and how their individual performance contributes to achieving the company’s objectives. That’s the findings of a recently updated communication study conducted by Watson Wyatt Worldwide. The goal of the study was to identify which communication practices deliver the best return on investment (ROI). Among the 335 participants surveyed, 60 percent worked in global organizations. Given the trend toward globally diverse companies, executives must now communicate across a broad spectrum of culturally diverse employees to drive higher corporate returns.
“Organizations are more global than they have ever been,” says Lisa O’Driscoll, San Francisco’s communications practice leader with Watson Wyatt Worldwide. “The communication effectiveness of a global company is often dependent on the company’s ability to understand the different cultural contexts and reference points within the employee population.”
Smart Business spoke with O’Driscoll about how executives can communicate effectively across a culturally diverse staff.
How does executive communication play a role in engaging employees and driving ROI?
Despite conventional wisdom that immediate supervisors play a role in driving retention and engagement, strong senior leaders who communicate effectively and frequently are a more important factor. We’ve found that highly engaged employees receive communication from senior management far more frequently than less-engaged employees.
How can executives communicate effectively across a global organization?
No matter what their location across the globe, committed employees are proud to work for their companies and motivated to help drive success. Commitment is essential to retaining high-quality employees and delivering long-term financial success, but commitment alone is not enough. Employees also need focus and direction, something that Watson Wyatt calls ‘line of sight.’ Simply stated, creating line of sight between executives and employees means communicating in ways that allow employees to understand the organization’s business goals, the steps that must be taken to achieve those goals and how they can contribute to achieving these goals.
How can CEOs create a line-of-sight communications plan?
For U.S. companies, communication is often northern-America-centric, so executives must adjust by starting the conversation with an employee value proposition tailored to all employees globally, not just those in the home country. Senior management and mid-management should trained on effective communication techniques and managing multicultural and multi-country teams. A global communication strategy should align the firm's business objectives with the employee value proposition while providing the platform for localization that reflect different cultures and local business conditions.
In all cases, companies need to develop a sustainable communications strategy that supports their mission, aligns employees with the business strategy and allows them to understand their role.
What elements comprise an effective line-of-sight communications plan?
First, no one strategy fits all companies, so each needs to decide what type of company it wants to be and how that supports its external brand and strategy. One company may be comfortable being a U.S.-based company with offices abroad, while another organization may want to be a true global organization with country heads running different business units.
In all cases, companies need to develop a communications strategy that supports their mission, is sustainable, aligns employees with the business strategy and allows them to understand their role.
What are the best tools for effective global communication?
Global communication requires the use of several tools. For example, many companies have a large dependence on e-mail. While e-mail is effective, it’s not the same as face-to-face communication between an executive and employees. In some cases, employees are receiving thousands of messages a day, so naturally it’s easy to see why e-mail can lose its effectiveness. It’s also hard to communicate a strong sense of leadership through e-mail. To maximize time and efficiency, new technology can help executives engage their employees through more personal communication. Blogs, podcasts, webcasts and teleconferences all have their place as part of an effective communication strategy. In considering tools, companies should consider company culture, local culture and, of course, the content of the communication.
What ROI increases can a CEO expect from establishing an effective communications plan?
Companies with highly effective communications plans had a 57 percent higher return to shareholders and a 19.4 percent overall increase in market premium during the five-year study period. During that same time, companies with effective communications plans were 20 percent more likely to report lower turnover rates than their competitors without a plan. Our statistics at Watson Wyatt show that the cost of turnover is roughly 48 percent to 61 percent of the annual wages for that position. Many companies brag about employee loyalty and their low turnover rates. Our study shows that committed employees actually drive shareholder return and take employee loyalty to a whole new level.
LISA O’DRISCOLL is the San Francisco communications practice leader at Watson Wyatt Worldwide. Reach her at (415) 733-4304 or firstname.lastname@example.org.
An employee in San Francisco needs to meet with a co-worker in Israel, but instead of hopping on a plane and spending a day flying halfway around the world, she grabs an empty conference room, signs out video-conferencing pieces and calls her colleague. He answers using the same technology, and the two converse, face to face, to discuss the issues they needed to work out for a major project.
This happens every day at Polycom Inc., a video and audio collaboration solutions company, and Bob Hagerty, chairman, president and CEO, relies on these technologies just as much as his customers do, so he constantly pushes his organization to be the best in the market.
This push for excellence has fueled the company’s growth in the last decade. Since he joined the business in 1997, Hagerty has grown Polycom through a combination of organic growth and acquisitions from about $50.4 million in revenue to $682.4 million in revenue last year. Whether growing organically or through acquisitions, Hagerty believes wholeheartedly that to grow a company, you have to have a plan, measure that plan, communicate with customers and stimulate innovation in your organization.
“Growth is hard,” Hagerty says. “It’s hard work. It requires real attention. It requires risk-taking. You have to really understand. You can’t just follow, and you have to have an organizational structure where it takes moderate risks and occasionally will fail.”
Creating a plan
You can’t book a flight for a business trip or vacation if you don’t know where you’re going. In the same sense, leaders can’t grow their company if they don’t know where to lead them.
“Each individual market has a different strategy,” he says. “You start with a strategy. What’s your value proposition to the customer, and how do you deliver that value proposition? Communicate that value proposition, and then build your plan top to bottom and measure, measure, measure, and keep an environment where you allow people to participate.”
After an off-site meeting where the strategic plan is created, Hagerty and his team start working on getting buy-in from the rest of the employees. He starts with a meeting at the beginning of the year, with all the managers, where the issues are explained and broken down into their basic elements. At this meeting, Hagerty and senior management explained the strategy for the year.
He then broke everyone up by natural work groups and had them evaluate the issues involved and the ways they can achieve the strategy. Each group presented its thoughts to the room, and others asked questions and challenged the group to create further thinking.
“The idea is then they go out and do the same thing with their groups and get everybody to buy in with the goals,” Hagerty says.
He follows up on the overall strategy with a quarterly business review, which allows everyone to bring up any concerns or problems along the way, and that’s where he makes adjustments if needed.
“The plan always stays because whatever adjustment you make, whether you’re going to spend more money in an area or less money in an area, it still needs to show the return, so we use the plan as our baseline,” Hagerty says.
Managers again facilitate their own communication with the people below them to keep a pulse on their areas, and so they know exactly what to report at the next quarterly meeting.
“The idea is that everybody has weekly staff meetings and regular one-on-ones with their people and is setting goals as this whole process continues to churn,” Hagerty says. “The issues we have with the senior executive staff are just a culmination of what they’re seeing at their level, and the staff they have reporting to them have challenges.”
As Polycom grows, Hagerty depends on measurements to ensure that these processes are still carried out and effective. He measures customer satisfaction, failure rates in the factories, marketing metrics, sales metrics and other leading indicators.
“Measurement is a cornerstone of how we drive the company forward and track where we are against our plan,” Hagerty says. “If you can’t measure it, it isn’t worth doing it. You are what you measure. People will resonate to what they’re measured on. If you don’t measure them, they don’t think you care, or nobody thinks it matters.”
While creating metrics for salespeople is often straightforward, management also needs to create metrics for other departments, so everyone has specific performances to work toward.
“Find things to proximate goodness,” Hagerty says. “If it’s marketing, you’re trying to track leads or impressions. If you’re in engineering, you’ve got milestones you’re trying to get through to get a product developed. There’s always something. It’s just setting a target, setting a plan and measuring your progress toward achieving those plans.”
Without having clear metrics and goals, a company remains stagnant.
“If you don’t have goals, I don’t know how you can go from Point A to Point B.”
A couple decades ago when Hagerty worked for another company, he met a major customer for lunch and excitedly explained to him what technology shift his company was going toward, but the customer just gave him a funny look.
“You don’t think that’s the way to go?” Hagerty asked.
“It’s technically the way to go, but it’s not going to happen,” the customer responded. “There’s not enough capital in the system to change over the equipment and make the shift to this different standard.”
This rocked Hagerty’s world, leaving him in shock as he pondered the customer’s perspective on a very long, thoughtful plane ride home.
That experience, while 22 years ago, has shaped Hagerty’s attitude toward customers. He realizes now how important it is to speak with them and know their concerns, challenges and thoughts on products, and he drives that every day at Polycom.
“Understand your customers,” Hagerty says. “Talk to your customers. Love your customers. Our first value is put customers first and profit will follow.”
Senior leaders have to get out into the field to talk to them. Hagerty spends 50 to 80 percent of his time with customers. He asks a lot of questions about what they think Polycom is doing well and what it struggles in. He also asks them what they need and what their problems are. Additionally, he runs new technologies by them to see how they like them, and he asks what kinds of additional technologies they would need.
He then takes the suggestions and ideas they give him back to his people for them to solve and implement in their technologies.
Hagerty’s commitment to putting customers first shines through when a customer calls with a problem. It may not be Polycom’s technology that’s the issue, but his people understand how the equipment is supposed to work more than the customer does, so they work with the network provider to fix the problem.
“We are one part of a big network environment,” Hagerty says. “Sometimes it’s not us, but it’s our brand on the product, and that’s what they’re trying to use, so we go fix it even if it’s beyond our scope.”
To ensure that employees stay focused on customers, he both hires and rewards people based on it. During interviews, he flat out asks them how they view customers.
“You challenge them on that,” Hagerty says. “Where does the customer fit in your process and your thinking? If they’re not saying the customer is first, then that’s a problem.”
When those people come into the business, they see the different tools used to gauge customer satisfaction. Hagerty uses customer statistic measurements, has weekly sales meetings to discuss customers, and hosts quality sessions and customer response meetings. Polycom also has review meetings where Hagerty and his people review data about what the customer is feeling. From there, they make distinct decisions and follow up on them. Hagerty then financially rewards employees based on how well the company does.
“Bonuses are based on performance, and performance is based on how well you treat and deal with customers, because you don’t get there without customers,” Hagerty says. “They’re the only one who pays our bills.”
Companies don’t grow, and they certainly don’t lead their markets, if they don’t have the newest and most innovative products out there. Because of this, Hagerty strives to be what he calls the “best in breed,” and as a result, Polycom has more than 550 patents issued and pending. But this innovation can’t be forced on people.
“You don’t drive it,” Hagerty says. “You set a goal, stimulate people, give them time to think it through, challenge them and have the right people who really want to innovate. It’s not about just get in line and follow. It’s about let’s do something different. Let’s make a difference.”
Employees understand the difference they make in customers’ lives because they use the technologies every day to meet with people all over the world. They know the amount of time saved and how much more productive people are by having eight video conferences a day versus traveling and having maybe two. They know how much more effective a phone call is when they can see the other person.
Employees use their own experiences and customers’ problems to create the best solutions.
“Sometimes people offer solutions, and they’re great solutions,” Hagerty says. “Sometimes they’ll just be able to describe the problem, and what we need to do is come back and use our expertise to formulate where we should be going.”
He relies on his people to take those problems and voices as vague as they may be at times and research them to see how they can be solved and implemented.
“You have to decide from where the technology is going, what is achievable,” Hagerty says.
He has a full-time product management team to solve those problems and answer those questions. He also invests 14 percent of the company’s revenue in research and development and another 8 percent in marketing, but the outcome is worth the investment because it allows Polycom to remain at the front of the pack, and the longer it stays at the front, the more it will continue to grow.
“In our area, it makes sense because the dynamic of the market is fairly rapid, and the technology continues to improve,” Hagerty says. “Our strategy is to be best of breed. We have to be the leadership. We want to be. We are. We measure it, and we expect to be the leader in each space we’re in.”
HOW TO REACH: Polycom Inc., www.polycom.com or (800) 765-9266.