Epic proportions Featured

7:00pm EDT December 26, 2008

When Tom Kelly took over as president and CEO of Epicor Software Corp. in February 2008, he set out on a fact-finding mission to learn more about the organization.

Kelly knew quite a bit about the business after eight years of service on the company’s board, but he had been isolated from most of the day-to-day work that was done at Epicor’s locations around the world.

He wanted to know the enterprise resource planning software business the way his 3,200 employees did. He wanted to see what the customer saw.

“The essence of Epicor rests as close to customer as possible,” he says. “If you think in terms of communications, you go where your customers are. You start there.”

He headed out and spent the first few months in his new position in front of employees and customers, listening to their ideas and complaints. He asked them what they thought Epicor was doing well and what they thought the company could improve upon. Kelly met with employees in person, over the phone and through video-conferencing — whatever it took to generate a dialogue.

“Initially, I wanted to look the employees in the eye and listen to them tell me what they thought we could accomplish at Epicor,” he says.

One factor in particular was integral to the success of Kelly’s information-gathering travels: keeping an open mind.

“That was my foundation point,” he says. “I didn’t walk in with a game plan of changes or a game plan of what we had to do to bring Epicor to the next level — I walked in with my ears open because I knew there was a lot of transition under way.”

One of the things he quickly discovered was that Epicor’s growth was hurting the company’s long-term potential. What was once a small, agile, $154 million company in 2003 had become a $430 million rapidly growing enterprise through internal growth and acquisitions.

The company’s agility had always been a cornerstone of its growth. Without the ability to accurately interpret data and then rapidly take action in response to market changes, the company’s design and development of enterprise resource planning software may have never happened in the first place.

Kelly’s challenge was not to find ways to move more quickly, it was to find out how to keep Epicor’s agility as the company continued to expand. His objective was to adjust the company to its new size without sacrificing the core things that made Epicor so successful.

“Reinvention doesn’t necessarily mean changing your DNA,” he says. “It means allowing you to participate in a current market just as effectively as you participated in a prior one. We’re reinventing ourselves so we know how to operate in this new size just as effectively as we operated in our prior size.”

Go flat

Kelly started his quest to keep Epicor agile by making it into a flatter organization and improving communication.

When he took over, the company had just made a major acquisition, and as a result, several executives moved to other roles within the company or left Epicor altogether. He took that opportunity to flatten things out by simply not filling those positions.

With fewer levels of management, communication at Epicor moved swiftly. The switch to a flatter management structure was intended to put Kelly a few steps closer to the company’s customers and bring everyone in the organization a few steps closer together.

“The smoother and more quickly you communicate, the quicker you can make decisions and respond to market opportunities or challenges,” he says.

One of the roles Kelly eliminated was the chief operating officer role. Previously, the functional heads of Epicor’s departments would report to the president and COO — now they report directly to Kelly. He says cutting that extra level of communication helps the company stay agile by speeding up the decision-making process.

“It’s much more real-time; there’s no filtering and no delay on that,” he says.

By eliminating the COO role and essentially taking on that responsibility in addition to his CEO duties, you could imagine that Kelly’s time is in short supply. But he says that there is plenty of time in the day for his constant communications, if you make the most of it.

“Yes, your staff meetings are important; yes, having the team together is important,” he says. “But it’s almost more important that when I’m driving into the office in the morning and it’s early on the West Coast that I’m on the phone to other parts of the company that are already up and about.”

Kelly takes advantage of that commute time for short conversations, used to touch base with his top team members who are scattered across different time zones. Taking advantage of hidden time like that to stay up to speed can help a lot in the long run.

“I listen to them tell me how they are doing in their business, what challenges they have, how they’re doing on their plans or objectives,” he says. “You don’t want to have such formal communication that they feel the only time they talk is the formal setting. You need that same informal constant flow of data: e-mails and those brief phone call catch-ups. Get up to date with how they’re doing.

“It’s the same with my customers. They don’t have to be long, two-hour meetings, but multiple, frequent touch points with customers.”

Successful communication requires that you be a good listener, not just a smooth talker. Kelly allows his employees to freely express their views but cautions that CEOs must listen for more than one thing.

“You can listen to their words, and you can listen to their actions,” he says. “If you do both, it’s pretty hard not to conclude whether somebody is on board or not.”

Kelly looks for the operating plans and tactical plans his team devises and then measures their performance by monitoring how the customers are responding. Basically, he looks to see if his executives’ actions are backing up their words. If they have clearly set objectives, detailed plans and their teams are responding well to them, then they are on the right track.

Set high expectations

With a thinner, leaner management team in place, Kelly needed to get more from the management team he kept around. They would be able to make decisions quicker, which would help the company’s agility, but more pressure would be on fewer people.

“I do have very high expectations,” he says. “I try to put people in place who I think are great people who can do great things.”

Kelly’s great expectations are both a reflection of the faith and pride he has in his team as well as a world-class motivational tool.

“Any individual performs best when they know people are relying on them and people expect them to perform well,” he says. “I think that’s true in anything.

“People tend to live up or live down to the expectations you have for them.

“I’d prefer to have very high expectations, because it’s a lot more enjoyable to live up to high expectations than to live down to lower ones.”

Some people could crack under the weight of such high expectations, but Kelly has faith in the team he’s assembled, so he empowers the team members by listening to them and showing them trust.

“That means you have to make sure that they know that when they’re not with me and they’re off making a decision that I will back them up, and that if the decision is a tough one, that they’ve got my support,” he says.

“If the decision ends up going awry somehow, they won’t feel that they’ve been thrown under the bus. Let them know that they are in this together with us to build this value.”

Part of becoming agile again means pushing decision-making down as low as possible, and that requires teamwork to get the best decisions.

“I encourage my team to work with each other — I try to discourage that stovepipe kind of thinking where somebody sees an issue and it goes directly to me,” Kelly says. “There are times when that is appropriate, but more often than not, it is appropriate for those executives to work with each other to make these decisions first and bring their different views of the world to me.

“If you are not able to accomplish that, you’ve got a lot of bad things that come out of that. You have a team that’s not working effectively together.”

In the end, it all comes back to communication. “What’s important is that we listen — do we listen to one another?” Kelly says. “We need to vigorously debate and challenge one another. Then, we must demonstrate through our actions that we are, in fact, applying the same requirements of ourselves that we would ask anyone else in the company.”

HOW TO REACH: Epicor Software Corp., (949) 585-4000 or www.epicor.com