managing partner, Pivot Point PartnersPriya Cherian Huskins
partner and senior vice president, Woodruff-Sawyer & Co.Jon Fisher
author, Strategic EntrepreneurismDavid T. ibnAle
managing director, TPG Growth LLCDavid Jochim
senior vice president and manager, Union Bank of CaliforniaBarbara Kosacz
partner, national head, Life Sciences Practice, Cooley Godward Kronish LLPPatrick Lo
CEO, NETGEAR Inc.Issac Vaughn
managing director, SC Investments Consulting LLCEllie Victor
CEO, ZOOM Marketing
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
Taleo Corp. has gone through a lot of changes since Michael Gregoire took over as chairman and CEO in 2005.
Gregoire led the company through a successful initial public offering in his first year and completed four acquisitions between 2005 and 2008. In addition, he grew the company’s revenue, coupling that with a higher level of profitability.
Taleo offers on-demand, unified talent management solutions that empower organizations of all sizes to assess, acquire, develop and align their work forces for improved business performance. Under Gregoire’s leadership, the company has transitioned from a traditional software licensing model to its current model of software-as-a-service. This model has been key to the company’s success and is preferred by customers, as it requires less initial investment and has relatively lower ongoing support cost compared to products offered by larger companies. Gregoire has also segregated Taleo’s product offerings and the sales and marketing function between small businesses and large corporations, giving it an edge over its competitors by allowing it to deliver a more customized solution to its customer versus a cookie-cutter approach offered by many competitors.
It is Gregoire’s vision to build a talent management community, which he believes would fuel the growth for Taleo’s products and offerings. To do this, he plans to roll out talent exchanges, also known as Talent Grid, in 2009. The Talent Grid will allow collaboration between companies to leverage their talent pool and exchange talent management ideas and best practices.
Gregiore’s technical direction has helped the company scale its existing products and add new offerings to its product suites. His leadership has kept the company profitable, even in the current economy, as it has continued to invest in research and development and product innovation.
And while competitors have cut staff or retrenched, Taleo plans to continue hiring.
How to reach: Taleo Corp., (925) 452-3643 or www.taleo.com
When John Varel founded FusionStorm as an Oracle reseller in 1994, the technology landscape was quite different than it is today.
There were no companies providing a full end-to-end IT solution to the customer, including procurement of hardware and software, integration services and monitoring of a company’s IT environment.
Varel, FusionStorm’s CEO, realized that if his company could create a fusion of the best software, the right hardware and a team of experts certified in a wide variety of applications, he could end deployment complexity, cut expenses and build long-term relationships with customers and vendors. Varel focused on selling a fully integrated solution, adding a layer of managed services, which meant selling systems that are staffed 24-7 with experts to customers. He also emphasized building loyalty and creating deep relationships with customers and vendors, focusing on execution.
In the first five years of operation, Varel led the national systems integrator to the head of the pack, helping it acquire thousands of customers while building and providing innovative, cost-cutting IT solutions. By 1999, FusionStorm was the leading managed services pioneer, but during the technology downturn of 2000-2001, revenue dipped significantly. However, when IT spending rose again, revenue soared by 260 percent between 2003 and 2004. FusionStorm has also expanded from one office in San Francisco to more than 21 across the U.S.
And as during the dot-com bust, Varel sees the current economic slowdown as a chance to expand his offerings, poising the company for future growth.
How to reach: FusionStorm, (415) 623-2626 or www.fusionstorm.com
Media, Entertainment and Communications
For Scott Allison, it’s all about the work. And that philosophy has permeated the culture at Allison & Partners, the public relations company he and his partners launched in 2001.
The company almost didn’t get off the ground as Allison and his partners scrambled to raise capital to execute a management buyout of the failing firm they’d been working at. They succeeded but couldn’t have launched their firm at a worse time one week before Sept. 11, 2001. That timing, combined with clients who felt the industry’s quality of service was poor, dealt a blow in the wake of the dot-com crash.
But Allison who serves as the company’s CEO felt the general PR firm model was broken and strove to create a new way to serve clients. He wanted his firm to be a midsized, independent company with a national footprint, with the service of a boutique agency and the resources of a larger option. And to avoid being pigeonholed, he took a generalist approach with the idea that no company was too small to take on as a client.
To counter the perception of a lack of quality in the industry, Allison hired top senior communications professionals and ensured that every client had access to them, and today, higher-level employees are involved in all aspects of the business. He also built strong relationships by positioning his team as a partner to clients, not just as a vendor.
And instead of having branch offices compete against each other, Allison has just one profit-and-loss statement for the entire company, encouraging collaboration and leading to a team-oriented approach.
Under Allison’s leadership, the company has achieved year-over-year growth of more than 50 percent and has offices in seven cities, serving clients in the consumer/digital technology, consumer, professional services and nonprofit/public affairs industries.
How to reach: Allison & Partners, (415) 277-4933 or www.allisonpr.com
Health and Life Sciences
After Euan S. Thomson lost two grandparents and his stepfather to cancer, his career path was set.
Today, as president and CEO of Accuray Inc., he is devoted to the treatment of cancer through the use of his company’s product, CyberKnife, a robotic radiosurgery device that noninvasively destroys cancerous tumors with high doses of ionizing radiation.
The product has been hugely successful, leading to an IPO in 2007, but it wasn’t always that way. When Thomson arrived at the company in 2002, it had had three CEOs since its 1990 founding and had only a few months of operating capital left. But he believed in the company and was prepared to take big risks to make it successful.
To do that, he developed Accuray’s financial and business strategy and guided its clinical development program, technical R&D, and sales and marketing. He targeted European countries and invested in clinical studies to get the product approved for commercial use across the pond.
Closer to home, he instituted a corporate culture focused on high ethical and moral standards, which includes encouraging employees to participate in philanthropic activities that focus on cancer research, and a patent award program that recognizes those who contribute to product innovation.
Thomson’s efforts quickly paid off. Within a year of him assuming leadership, Accuray became cash-flow positive for the first time in its history. The company has installed more than 150 of its CyberKnife systems in 17 countries, and it has treated more than 60,000 patients for not only brain tumors the original use of the product but for lung, spine, liver, pancreas and prostate tumors, as well.
And to further encourage the use of his product, Thomson has implemented a marketing plan to partner with hospitals to guarantee their return on investment in his product, allowing them to reduce their cost of health care and treat more patients.
How to reach: Accuray Inc., (408) 716-4600 or www.accuray.com
Current economic conditions offer M&A bargain hunters a variety of strategic opportunities. But executives focused on plans for expanded product lines and market reach often overlook the need to consider the financial risks, not the least of which includes integration of employee benefit programs such as retirement and medical. The complex process might entail meeting future obligations and complying with both U.S. and international regulations and disclosure requirements.
The accompanying costs are often characterized as minor when the deal price is under negotiation, but with these costs rising around the globe and an increase in administrative and reporting complexities, a lack of proper planning and due diligence may undermine the success of M&A transactions.
“World-class acquirers assess the financial risks with benefits and plan the integration strategy during due diligence. It’s those that wait until after the announcement that run into trouble, since they don’t know what they are getting and can’t change what they’ve agreed to in the purchase agreement,” says Alex Young-Wootton F.I.A., F.S.A., senior international consultant with Watson Wyatt Worldwide. “Risks associated with cost and compliance for employee benefits often arise when the buyer begins to integrate two disparate benefit plans onto a universal platform, only to find the financial impact and integration strategy weren’t given due consideration when the deal price was calculated.”
We have all read about how many M&A deals fail to meet their objectives due to insufficient integration planning. Recent tough economic times only serve to reinforce the necessity for success.
Smart Business learned more from Young-Wootton about the hidden benefit risks that threaten M&A success and the steps executives should take to mitigate them.
Why is due consideration of employee benefits a key driver for M&A success?
Benefits assessment and their subsequent integration play a major role in assessing the true economic value of the target and in retaining key employees, which directly impacts the success of the newly combined organization. Also, it is critical to be able to correctly identify, quantify and allow for the financial implications of the liabilities being inherited.
In addition, the M&A transaction may necessitate compliance with additional regulations, either because a change in control subjects the organization to another country’s laws or the size of the newly combined organization mandates that additional benefits be offered to employees, which need to be reflected on the company’s balance sheet.
The recent fall in equity markets has highlighted the significant risk that pension provisions represent, however in addition to economic factors, a multitude of other factors affecting volatility, cost and competitiveness of the benefits provided need to be considered. Long-term obligations may be underfunded and require future cash infusions to plug these deficits, which can be offset during price negotiations if the financial risk is known, quantified and understood.
Why are employee benefit costs frequently overlooked?
Executives may perceive that retirement costs are relatively fixed and just look at what’s currently on the balance sheet, thus requiring no further investigation, without realizing that they bring with them compliance complexities and integration issues critical to the success of the M&A process. However, many inherited liabilities may bring with them previously not required disclosure requirements and, given the sign-off requirements imposed by Sarbanes-Oxley, executives need to include identification of these costs and risks as part of the early review process.
Which techniques reveal these hidden risks?
Simply, better due diligence, including integration planning before the transaction is complete by examining each element of your company’s benefit plans and those of the target organization. Sometimes the identification process may reveal hidden liabilities, especially around mandatory benefits outside the U.S., because those costs are frequently overlooked, especially by organizations that believe they only have a global ‘DC’ strategy in place. Many companies get confused with the term mandatory, assuming its state or government paid, but this is not the case; the state determines you have to offer the benefit, but the company pays for it.
Identify any accounting implications, including the need to comply with additional disclosure requirements, as well as how the transition to the post-deal benefits platform will take place. Once the liabilities are identified, quantify their value using an approach and assumptions that are appropriate for the purpose. Dollarizing the liabilities will help executives understand their impact on the transaction as a whole and potentially impact the deal price.
What other risk mitigation techniques are effective?
Once the risks have been examined during due diligence, additional techniques can reduce their impact.
? Attempt to leave the employee plans and their related liabilities with the seller as part of the negotiation process (and get the employee onto your plans for future service).
? Introduce indemnity agreements that result in post-acquisition price adjustments as a hedge against unforeseen benefit costs or lackluster asset performance.
? Communicate the possibility of an acquisition to your HR staff early on so they have time to conduct effective due diligence and reflect risks in final purchase price.
? Don’t lose sight of the need for a competitive package and its value when contemplating the long-term risks associated with employee benefits.
Louis Provenzano can tell his employees how great Language Line Services is, and he does so every chance he gets. He can talk about all the potential his company has for future success, and he does that, too.
But in order to achieve those lofty aspirations, Provenzano would need to get his employees to believe his words and be willing to put their own skills to use to reach those goals.
“Play to everybody’s strengths, provide them the opportunity of using their own individual strengths and continue to excel,” says Provenzano, president and chief operating officer at the interpretation service provider. “When you’re a successful company, people expect more. My biggest challenge is how do I make people do more and really feel good about the direction of the company.”
Language Line provides over-the-phone interpretation service in more than 170 languages through the company’s 7,000 employees. The key to future growth would be Provenzano’s ability to tap into his employees’ talents and fuel their drive for personal and companywide success.
Smart Business spoke with Provenzano about how to build a team that can help drive growth.
Set clear goals. I had to set the standards to make sure everybody would sing to the same music and have a methodology of going out into the market and explaining our value. It really is making sure that the team really understands their roles, how they can prosper in their roles and how they can use the tools that we currently have in the organization.
Goals have to be very well articulated from the president’s office. You have to ensure that the entire company understands what needs to be accomplished. Setting the goals and objectives and requirements has to be well-articulated. Everybody needs to understand that and understand what their contribution is to achieving those company goals.
Build strong bonds. The thing that a good leader does is they bond with their people, their customers and with their shareholders. Listen and pay a lot of attention to suggestions. We’ve introduced kaizen here at Language Line, which is a continuous improvement methodology.
If you spend a lot of time in the trenches and a lot of time with your customers and ask what their biggest pain points and challenges are and what they need to be more successful, guess what? They will tell you.
I travel an awful lot, not only for speeches and various interpreter sessions, but I’m out there in the market with customers and employees. I’m constantly asking: What can we do differently? What can we do better? What do we need to change? What do we need to do better?
I try to get to a lot of the managers’ meetings on a regular basis throughout the course of the year. I’ll ask what’s on their mind. What went well with our customers this week? What did not go well? What are some of the challenges we’re currently having?
Reward enthusiasm. Encourage people to participate. If they are in an environment where they feel they can contribute openly and honestly and that their feedback is going to be taken into consideration, people will do more of it. People will recognize if you reward for good behavior and you reward when there is great success.
I personally believe in picking up the telephone and making X amount of calls every week to key employees when I see something that is noteworthy that needs recognition. Getting a letter or a phone call from the president of 7,000 employees is very difficult to do from a timing standpoint, but it’s extremely important.
Success always begets success. If you have an open environment where you encourage people to perform at their highest level of achievement and you publicly recognize the top performers, it encourages a healthy environment for everybody wanting to be a part of that excellence.
Develop accountability. People will get paid for great performance. People recognize that management is in this with every single individual in the company. We try to make very transparent what everybody has to do. In doing so, we also make very transparent what people have not done.
Everybody has a personal responsibility to sign up and agree to do their fair share to make this company continue to be a success. Everybody has some objective they are very closely monitored on.
Find out what your customers need and let’s try to be creative in addressing a solution that adds value. You hear people say to think outside the box. There is no box. The sky is the limit.
Follow up on goals. Objectives that were set by the president at the beginning of the year and the objectives carried out throughout the group are reviewed every single week. How are we doing with what we said we were going to do? Where are we ahead? Where are we behind? If we are behind, why are we behind? What are we going to do for corrective action?
If there is a problem in a given part of the business, then it goes back to the communication. We all bond with that problem, and we collectively agree that we need to do the following changes to get ourselves back on track.
Always strive for solutions. With every individual within our company, we have personal challenges and professional challenges. If you have a challenge or you have an issue, acknowledge it and be open about it. But let’s encourage people to be empowered to come up with the solution.
Don’t just bring up the problem. What is your best recommendation for solving the problem? If every one of our managers and executives ask for encouragement on solving the problem, people will feel empowered to come with, ‘Here’s the problem and six suggestions on how I think we can fix it.’
Encourage people to showcase their passion and rise to their level of talent. Give them the opportunity to speak out. If you empower your people to do something with it, chances are you’re going to have a very successful solution.
How to reach: Language Line Services, (800) 752-6096 or www.languageline.com
Executives need to garner increased levels of employee productivity and unabashed business innovation to drive their companies out of the recession. But capturing the hearts, minds and imaginations of workers has never been more difficult. With business plans in flux, budgets slashed and goals no longer attainable, employees are languishing under the weight of uncertainty, workplace stress and shifts in strategic direction. Executives can reap the benefits of an energized work force by capitalizing on engageable moments and creating a culture of continuous engagement.
“It’s difficult to align the efforts of employees with the company’s mission if the plan has become muddled,” says Matthew Kamensky, office practice leader for organizational effectiveness at Watson Wyatt Worldwide. “Leaders who set achievable goals, communicate continuously and capitalize on engageable moments can position their companies to emerge from the current crisis.”
Smart Business spoke with Kamensky about leadership strategies that engender a culture of employee engagement.
What’s the benefit from increased employee engagement?
Our Watson Wyatt research continues to validate the gains from employee engagement. Employees with high engagement work at companies with 26 percent higher revenue per employee and 13 percent higher total returns to shareholders over five years. Our research also shows that highly engaged employees have lower turnover and absentee rates, are more resilient and are better able to deal with the ambiguity of shifting business priorities than their lower-engaged counterparts. Furthermore, executives have a tendency to lean on the most engaged players to drive the company out of recession.
How do recessions impede engagement?
Engagement occurs when employees are committed to help the organization succeed and when they have line of sight — that they understand the business goals, the steps being taken to achieve those goals and how their roles and individual performance impact the goals of the organization. Recessions require constant course corrections, causing employees to lose their compass, so productivity suffers. Also, when goals become unattainable and monetary incentives are reduced, employee morale declines and stress increases, resulting in diminished focus on the business plan.
Which messages are most effective in driving an engaged environment?
Employees don’t expect executives to have all the answers, and it’s better to err by communicating more, rather than less, during challenging times. Engagement is bolstered by frequent executive communications, especially around milestone attainment leading to annual goals. But when milestones are missed and executives are struggling for answers, they are often reluctant to communicate just when it’s needed most.
Provide transparency around the difficult decisions you’ve faced, such as those involving staff reductions. Explain the reasons behind your actions so employees will understand why the moves were necessary. Capitalize on an engageable moment by educating survivors about why their performance is even more vital.
What other techniques bolster engagement?
Review past employee engagement surveys or conduct focus groups to discover employee hot buttons that don’t require increased budgets. Look to understand what drives engagement for the employee groups that have the greatest impact on the business. Recognizing employees for innovative ideas or cost saving tips doesn’t have to be expensive — yet public recognition of achievements offers an engageable moment and creates a culture of continuous engagement.
Look to your existing programs to create engageable moments. Any program or benefit, such as annual performance reviews or the launch of an open enrollment period, can offer an engageable moment if employers take the opportunity to connect those benefits to the value proposition employees receive for their contributions. Opportunities for engageable moments happen all the time; it’s just a matter of recognizing them and leveraging the moment.
What steps can executives take to reduce workplace stress?
Uncertainty, layoffs and pressure for results lead to workplace stress, which, if left unchecked, actually has a paralyzing effect on employees and is the leading cause of turnover. Expanding the company’s circle of core contributors reduces stress and bolsters engagement. Refocus employees on achievable goals that will not only help the company emerge from recession but enhance individual and company growth.
As an example, when layoff rumors persist, employees react by going into survival mode and become inwardly focused. Re-energize your employees around external goals, such as increased customer satisfaction, which is achievable in any economy. And, in the process of working more closely with customers, employees may even discover ideas for new products or services that will help the company emerge from the recession.
Matthew Kamensky is the office practice leader for organizational effectiveness at Watson Wyatt Worldwide. Reach him at (303) 575-9742 or matt.kamensky@WatsonWyatt.com.