Brooke Bates

When CBS aired “Undercover Boss,” disguising executives as front-line employees to experience their companies from the field, Steve Mechler was amazed — and not in a good way.

“It just boggles me to no end that these big bosses of these companies don’t have a clue what their employees are going through or don’t have a clue what their programs even mean to them,” says Mechler, president of SpawMaxwell Co. LLP, a Balfour Beatty company since its acquisition in 2009. “They’re in their ivory tower, and they’re not out there where they need to be — shaking hands, walking projects. … They’re just missing it totally.”

Mechler keeps close relationships at the foundation of the Houston-based construction company, knowing the way he treats employees will translate into how they treat clients, vendors and partners.

“It’s the secret to our success, absolutely,” says Mechler, attributing the company’s expanding portfolio to a history of collaboration with builders and referrals from clients. “We have a very simple philosophy: SpawMaxwell takes care of its employees, the employees take care of our clients, and our clients take care of the SpawMaxwell family. There’s nothing magic about it.”

His staff’s inherent closeness goes back decades. In fact, an old photo hangs in the office depicting the chief financial officer and the previous president, who grew up across the street from each other, building a treehouse as young boys. Many officers of the company attended grade school together; others joined the same fraternity at Texas A&M.

As new employees come into the culture, Mechler has to maintain that family atmosphere to keep the company close-knit and thriving.

“The key to really being successful in any business is to build relationships that last,” he says. “Not just build buildings or build interior spaces, but build relationships with the people you work with.”

Communicate expectations

Mechler’s 123 employees didn’t all grow up together as neighbors, classmates or frat brothers. They come from different backgrounds and values. To keep the company’s culture consistent, the first step is setting the expectations and bringing differences into a single framework.

“First of all, to make up a really good culture, you have to have different temperaments, talents and convictions,” he says, remembering the various characters it took to make a coherent fraternity in college. “You’ve got to help nurture that, and you also have to set expectations: ‘Here’s how we expect you to behave when you’re a SpawMaxwell employee.’”

One way of communicating the values you expect employees to exhibit is by ingraining them into the organization’s core. SpawMaxwell’s mission statement concludes with the line, “People first … success will follow.”

Out of that notion, the company developed a list of values to guide its actions. Those traits — authentic, right thing, respect, invest in people, build relationships that last, applaud each other and do it with enthusiasm — are organized into a memorable acronym, ARRIBA!

Mechler posts those values around the office to keep them constantly visible. But to really make your list resonate with employees, you need to do more than just point at a poster. Make values relevant by demonstrating that they’re pivotal to what happens at the company.

Use values as reference points to explain decisions you’ve made, projects you’re undertaking and other developments in the company. Bid day, for example, is an opportunity for Mechler to offer reminders about the importance of building long-term relationships.

“On bid day, (our vendors) give us better prices than they give our competition because we treat them fairly,” he says. “So all of those ARRIBA! values that we have play into that hugely in how we execute business. We’re here for the long run, not the short term.”

But even beyond that, the value acronym at SpawMaxwell has entered the corporate vocabulary as a catchphrase in itself.

“It’s gotten to the point where it’s such a part of our culture when somebody gets a project or something happens good in their life, instead of saying great job or awesome or fabulous, we’ll say ARRIBA!,” Mechler says. “What it means is, ‘Fabulous job. You did the right thing.’”

Lead by example

Employees from different backgrounds might have converging interpretations of intangible values like integrity and respect. Instead of attempting to communicate definitions of traits that can be hard to define, Mechler relies on action to illustrate what values really mean.

“If I’m respectful as a leader in the company to our employees, people see that. They understand that,” he says. “If I know their first name, if I know something about their families, if I talk to them as an individual, not as a boss and a subordinate, that means a lot. That’s respect. It’s not something that you can say and get; it’s something you have to do.”

You have to consciously build relationships and show respect from your position if you expect employees to follow suit.

“We have to live what we preach,” Mechler says. “So if we preach it and don’t live it, it’s not going to go anywhere. We have to be that stellar example for our employees as a leader in the company. That’s where it starts.”

One way to exhibit that respect is interacting with employees on a personal — rather than strictly business-related — level.

Mechler makes an effort to personally wish employees happy birthday, to write notes inserted in their paychecks, to take each of them out to lunch and to invite rotating trios into his office weekly to share coffee and chat about the company.

“My primary focus day-to-day is taking care of our people,” Mechler says on the company’s website. “Leadership for me means being present, being a good listener and being a servant leader.”

That means meeting employees where they’re at, getting out of your office to walk their projects and interact on their turf.

“You can’t sit in the corner office,” Mechler says. “You’ve got to walk around. You’ve got to visit with people.”

Beyond that, your corporate efforts should be an extension of those personal interactions. In other words, respect employees through company policies as well as one-on-one attention.

If an employee is involved in a certain charity, for example, SpawMaxwell will consider supporting it with donations of time or financial contribution. This shows that the company cares about employees’ personal interests enough to devote corporate resources.

Another way to show organization-sanctioned care is to respect employees’ vacation time.

SpawMaxwell, for example, prepares for heavy vacation seasons like summer and end-of-the-year holidays by pouring in extra resources to cover jobs so employees can take time off.

“We have superintendents, obviously, that need to take vacation,” Mechler says. “Respecting that individual and family time, … we always try to have a reserve of superintendents that are sitting on the bench (so) we can fill those positions on those projects so those guys can take their vacations when they want to take them.

“Therefore, we add money to our

overhead, but we’ve got to live by what we say. We’ve even had several of their project managers and/or several of the officers of the company that have sat in on projects for a day or two because the right person wasn’t there to man that project, just to give that superintendent a break.”

Tackle value breakdowns

Establishing connections with employees is also a built-in way to gauge their adherence to your values.

“If you’re engaged well, you’re going to hear what’s going on, either from other employees, from vendors, from clients,” says Mechler, who maintains several touch points to check whether employees respectfully follow through on promises to clients or enthusiastically cheer on other team members.

Solicit external perspectives to see how employees behave when they’re not under your observation. SpawMaxwell conducts surveys at the end of every project. An employee in its closeout group calls several customers or partners from the project, such as the building owner, architect and construction manager. The last and most revealing questions she asks are, “Would you use us on your next project, and would you recommend us to a peer?”

“If that’s a resounding yes, then we’ve been totally successful,” Mechler says.

With more detailed questions about the project, you can gather feedback about employees on a case-by-case basis.

“Sometimes there’s a disconnect, where we may not get that recommendation or we may find out there is an issue on a project. We can jump on that right away,” Mechler says. “It’s a very good tool for us, because we’re only as good as the last project we did.”

Hopefully, you’ll become aware of issues before hearing input from the outside. If you want employees to bring issues to your attention, build internal touch points into your process.

Every Wednesday morning, project managers and officers at SpawMaxwell’s Houston headquarters hold a Manpower Meeting to catch up on each local project. Offices in Dallas and Austin hold similar sessions on Monday and Tuesday.

You can provide avenues and expect feedback to bubble up, but the biggest challenge is establishing a comfortable zone where employees can open up, especially if they’re bearing bad news of a breakdown in your expectations. That’s where — once again — the relationships you’ve built will provide background.

“When you’re leading a company, it’s hard for somebody to just come in and say, ‘Hey, this is going wrong. I need some help with this, or I need some help with this individual,’” Mechler says. “[You make them comfortable] by visiting with them and by having coffees with them, by being open with them, by celebrating the good times, dealing with the bad times. … You have to, first of all, know the individual well enough where you can really talk to them.”

The reputation you’ve built plays a big part here. The way you’ve reacted to news in the past determines how readily employees come to you with more.

“If you’re going to berate them when they do something wrong all the time, it’s not going to work. Who wants to come see somebody that’s going to yell at them?” says Mechler, comparing the interaction to good parenting. “If you’re going to help them to do things better and be with them and respect them, then they’re going to open up more. Having patience and calmness is a huge part of it.”

But don’t confuse calmness with quietness. When you find out about a value gap in your organization, address it without slack.

“If they’re not living up to the values, then you have to point it out,” he says. “You have to be steadfast about it. You have to say, ‘If you promised it, you need to make it happen no matter what — even if it costs us money.’ So you’ve got to be really diligent about that, and you’ve got to be consistent in how you deal with that. If you sometimes just let them slide and other times don’t, well, that inconsistency sends the wrong message because employees see right through that.”

Tackling mistakes doesn’t mean you step in and take over, though. Make the employee aware of the issue and your expectations, and then back off to let them fix it.

“You can’t always jump in there and solve the problem,” says Mechler, acknowledging it’s a tough tendency to break. “You can’t just (say), ‘Oh, I can make that phone call or here’s what I would do.’ You have to turn it around and say, ‘OK, you brought me this issue. What would you do?’ and then talk through that. Make sure the solution is their solution, not my solution.”

Mechler would rather see an employee make a mistake while trying to solve an issue, then deal with the consequences, than watch them sit idly by. Through that process, the employee will become better prepared to respond correctly in the future.

“It’s hard not to give them the answer … but you’ve got to turn that into a learning experience,” he says. “And the only way to do that is to have the employee deal with it themselves.”

By building relationships as intently as he constructs buildings, Mechler has poised SpawMaxwell for success more far-reaching than the company’s 2009 revenue of $238 million.

“Success is not monetary. My definition of success is the legacy that you leave,” he says. “It’s good if somebody would say, ‘He always cared about me. I was a person to him, not a number. He knew a lot about me. I appreciate all the effort he took in putting people first.’ To me, that’s the success.”

How to reach: SpawMaxwell Co. LLP, (713) 222-0900 or www.spawmaxwell.com

Some might say it’s a wonder that Mark Walker has been so successful through the recession — or that he’s even around at all.

In late 2007, when banks began restricting the warehouse lines of credit that First Preferred Mortgage Co. depended on, Walker faced a crisis. The co-founder and CEO of the retail mortgage company and its wholesale division, Michigan Mutual Inc., knew he couldn’t operate if those disappeared.

But thanks to some strategic planning, Walker was prepared for the worst.

“You have to always plan for a downturn,” he says. “Try to keep enough money in the company for reserves for those times. Always be proactive for unfortunate economic or legislative things that could affect your company.”

By diversifying, Walker guided the Detroit-based company to 2009 revenue of $30 million and nearly $1 billion in loans. His 145-employee work force grew 14 percent from 2008 and 30 percent from the prior year, proving he not only survived the downturn. He thrived.

Smart Business spoke to Walker about planning before you panic.

Get outside help. I don’t think you can ever just stay the same. You have to be looking proactively at any opportunities that are out there and, at the same time, keep a 4,000-foot-level [view] of what’s going on with the company so you don’t get too enamored in the minutia of everyday details.

One of the things that we advocate is trying to get outside help, to get consultants. Our board of directors has outside people on it that are not part of the company, so you get an opinion from others from a different view. Companies that just get the view of the employees or the management team can sometimes not get a good overall view of what other things outsiders could say.

So we use consultants quite a bit. We try to have them take a look at what’s going on in the industry to get fresh opinions. We’re always asking what’s going on in Washington, what is Washington looking at? There’s so many changes going on in our industry today, from licensing issues to legislative issues and regulatory issues, so we’re always asking that question.

We get input from as many consultants (as) we can. We’re going to seminars to find out what’s going on in the industry, and we try to stay abreast of all that.

Play what-if. Then we come back and we just plan, ‘What happens if this happens? What are we going to do if this catastrophe happens? Where are we going to move our business? If we can’t sell to A and B and C players, who are we going to sell to?’ We have those conversations monthly and weekly, so we play those scenarios out all the time.

[Leaders] get bogged down in the everyday issues and it’s important that you break out of that from time to time. Look around. Look at what other companies are doing in your industry — or any industry — and just see how they’re managing. We’re not bashful about taking advice from other companies and putting those policies and procedures in place to make our company better.

We do a lot of role-playing at our executive meeting. We take outside consultants and we have them role-play with us and say, ‘What happens if you’re doing this?’ or, ‘Are you doing this properly?’

Diversify with alternatives. We’re always trying to plan ahead for any scenarios. We’re trying to keep the company as nimble as possible so we can move in any direction.

We do most of our selling to the larger banks, the Wells Fargos of the world or the Bank of Americas. There was a push a year or so ago of those people maybe getting out of the business of purchasing our loans. In light of that possibility, we got licensed to sell directly to the agencies [Freddie Mac, Fannie Mae, Ginnie Mae] so we had an alternate way of selling our business.

It’s important to always look at alternatives in case things change. Once you’re set for those alternatives, then you can change directions very quickly. If you’re stuck with just one or two ways of doing something and that goes away, a lot of times that puts you out of business.

If you have all your eggs in one basket, that’s a problem. If something changes and you’re not able to diversify, you’re in trouble. We’re always looking for ways to diversify our business. If somebody is selling a product and all their products go to Wal-Mart and Wal-Mart decides to stop selling that product, what is that company going to do? I’d want to be able to have other avenues. You always have to look for ways to diversify other avenues to place your product and be ready to move if the climate changes.

Don’t take your eye off your core focus, but just [keep] looking for opportunities to diversify your business in case things change.

Plan for the future. So let’s say one of our goals is to double our volume of sales in the next two years. We’ll break that right down to the minute detail: What has to happen in the IT department in order to make that happen? What has to happen in the accounting department to double our volume? Are we going to need more people? Are we going to need a different accounting system in place? What has to happen in each department, whether it’s adding more people, adding systems, procedures, whatever?

We have certain goals that each senior manager has to accomplish before the next monthly meeting. He would take his goals; he would then meet with his department [and] say, ‘Here’s what we have to accomplish in the next 30 days when I report back.’

We hold each other responsible for doing the big-picture items in addition to doing the day-to-day things. We also have a weekly meeting on this so we take an hour and a half to two hours every week to see how we’re doing on this.

We talk about it all the time. It’s in everything we do. At every meeting, it’s discussed, it’s reminded. You just have to plaster it everywhere.

How to reach: First Preferred Mortgage Co., (800) 700-5839 or www.firstpreferred.com

Before he graduated high school, Scott Etzler became somewhat of a entrepreneurial celebrity in his southern Indiana hometown. He held three or four jobs, but the biggest was his own junk-collecting business that he started by picking up trash outside Salem’s city limits.

By 1970, he was working about 20 hours a week, at $25 an hour, bringing in $500 a week. In his words, he was “living large.”

Though he got out of waste management and into providing conferencing and collaboration services, his level of success hasn’t changed.

He joined InterCall as president in 1998 when the company had less than $50 million in revenue. He led the company through double-digit sales growth each year to 2009 revenue of more than $1 billion. In that time, the company has also evolved from simply offering operator-assisted calls to providing and managing advanced audio, Web, video and event services, and even unified communications.

“If someone says, ‘Well, gee, you’ve done pretty well for a kid from southern Indiana,’ I’m like, ‘Oh, because I know how to execute,’” says Etzler, who sold the company to West Corp. in 2003 and now runs it as a subsidiary.

The secret to his successful execution lies somewhere between a guess and a math equation — but really, it’s a lot of research and disciplined decisions. Etzler must listen closely to his 900 meeting consultants and 2,800 other employees in 83 sales offices worldwide, along with the customers they serve, to understand and assess opportunities in the marketplace.

“Anybody that tells you that it’s a classic formula that’s run through a meat grinder, I question that,” Etzler says. “There’s always a lot of unknowns because the markets can change and there’s some subjectivity on how big the market really is. … That’s what makes it fun, to see what happens.”

Listen to the market

The ability to identify opportunities begins with understanding the marketplace. Etzler takes the market’s pulse by putting out as many feelers as he can.

The first one goes out to customers, both directly and through your team.

“You need to listen to your customers, which will tell you how you’re doing right now,” he says. “You need to listen to your salespeople … and that gives you a great pulse on what the market is doing and a little bit about what the market’s going to do.”

Look for information from them to fuel both your short-term tactical and long-term strategic approaches. Begin by asking them questions, then dig deeper into their responses.

“From the tactical perspective, how are we doing and what can we do better?” Etzler asks. “Where are (customers) spending their money today and how can we improve our share of that spend? Then you … assess how big that market is, how much of that’s addressable from our perspective, at what cost, and try to put a business case together to figure out how to expand in the short term.”

Sometimes, ideas will come directly out of customer feedback. As InterCall’s customers expand into China and India, for example, they request services there, pushing the company to expand geographically. They also bring ideas about improving services — and, of course, keeping costs low — which pushes the company to improve technologically.

Though the later validation is an extensive process, ideas often come from a simple question.

“We’re constantly asking our customers what they want, and then we try to assess how big that market’s going to be,” Etzler says.

To further feed his view of the marketplace, Etzler also looks at macro trends and forecasts. He reads multiple industry trade publications to learn analysts’ predictions. His involvement with the Economics Club and the Executives Club of Chicago puts him in contact with other leaders, supplementing his view of the broader business world.

“Strategically, when you think of where the market’s going, that gets broader and a little less specific,” Etzler says. “Of that broader market, what do we think is our best space to attack first and how big is that addressable market and what’s that going to cost us to do that?”

Both industry and general business peers can provide valuable perspectives into the marketplace. For example, Etzler attends the executive sessions of Salesforce.com, a public company of similar size, to learn about new technologies it’s pursuing.

When possible, take advantage of the information available on public companies in your field. At the very least, learning about your competitors’ core competencies can help you strategically leverage your own.

“We’re continuing to go, ‘How big is that going to be?’” Etzler says. “‘Which piece of that do we think we can we address? Which piece of that will Microsoft probably take? Which piece will Cisco take? How much will be left over?”

Assess the potential

Once you identify opportunity in the marketplace — directly from customers, through trends or from gaps in your competitors’ offerings — you need to assess the potential.

“It’s kind of like that disclaimer on the securities: ‘Past performance is no guarantee of future results,’” Etzler says. “But it’s constantly just touching those three areas — sales, marketing and industry analysts — and seeing what they all say and then just making your best guess.”

Actually, it’s more of an informed guess. To get information on how internal capabilities match external possibilities, Etzler brings together a team of senior executives who represent the entire product process. It includes vice presidents of product management, product development, infrastructure IT, marketing, finance and customer service.

“So you have literally the whole life cycle of how does it come in, how is it executed, what’s the market and how do we bill it?” Etzler says.

Those varied perspectives will help you understand each step of the internal process for getting an idea to market. The group is especially helpful when you’re considering ideas that are outside of your core offerings.

“The first thing is, ‘How much revenue [will we get] from that customer?’ and the second thing is, ‘How replicable is that service; can we turn it into a product?’” he says. “And if we can, it’s a lot easier answer. And if we can’t, you’ve got to decide, well, if we don’t do it, what’s the risk to the customer?”

Basically, you need to determine how badly customers want it and what it will take you to provide it. Use your customers to test the need in the marketplace as well as the potential revenue it could bring.

To some extent, you can do background research. For example, InterCall comes out with more expansion services than brand-new offerings, so Etzler can simply look at who’s already using the service he’s expanding and what they’re currently paying. Then he can look at customers from other similar companies of comparable size to extrapolate who else may be interested.

But the research doesn’t replace communication, even though your goal through communication is to land on a number.

“The discussion that usually drives a new product or service, 90-plus percent of the time, comes out of our global marketplace,” Etzler says. “We go to the global executive team and go, ‘If you think we need to do this for XYZ Co., we’re not seeing it in other areas. You better get your sales folks out and ask some of their peers, at least in the vertical, ‘What do they think of this and is this going to be useful?’ and then we need to try to put a number on it.’

“You always try to wrap a number around it. To me, that’s part of the discipline of putting a stake in the ground. Instead of going, ‘Hey, it’s going to be really big,’ you go, ‘No, no, no. That’s good to know, but how big is it going to be?’ ‘Oh, it’s going to be a $100 million market.’ ‘Really? Well, how much of that’s addressable to what we’re talking about here?’ You try to just keep funneling it down to get as specific as you can.”

That’s the key for Etzler. He needs someone to champion the idea and uncover the business case behind it.

“The biggest red flag is if no one’s willing to put a stake in the ground of how much revenue we can drive, … who’s going to buy it and when,” he says. “If you can’t get something specific around the upside and the price points, if you can’t put it in form of an ROI, that’s a real red flag.”

Getting those specific numbers requires back-and-forth communication from your team. The sales executive may present the ROI for a certain product, then the IT executive may reply that it will take five additional people to handle the billing. So then you have to subtract that cost from the return.

“Not only do you have your cost of doing that, but … you only have so much of a resource,” Etzler says. “So then you’ve got your opportunity costs that you have to weigh against the request, because if you’re doing project A, that means project B or C or D [is] not getting done. … There’s always a push-pull because you only have so much resource, but you just try to measure where the market’s going tactically and where it’s going strategically.”

That prioritization of projects is a function of basic business. It’s easy when one project yields 10 times the revenue of another project. But, because of subjectivity, some projects can start to look pretty similar. So while boiling down ideas into numbers can help you make decisions, it’s not that simple.

“If it were just a math problem, it’d be easy,” Etzler says. “Then there’s the subjective questions of, ‘Well, how much can we really sell?’ and, ‘How upset are they going to be if we don’t do it?’

“It’s not as much if we’re right; it’s that someone’s willing to put their credibility on the line and give that number. Even if six months later, we go, ‘Wow, we sure overevaluated that,’ we at least have something that’s concrete on which we base our assumptions.”

Keep questioning

Sure, you could get it wrong completely, but that’s not usually the case.

“(It’s) not a matter of if some of these market trends are going to happen,” Etzler says. “It’s the when they’re going to happen.”

He gives the example of WebEx, the only still-successful Web conferencing company he can name from the original pool of 50 or 100 companies that invested in it — but timed it wrong.

“Most people have guessed wrong,” he says. “They were way too early so they had spent all their (money) by the time they really needed it. They had spent all their money on marketing, all their money on technology, and there was not enough people adopting and they went out of business.”

That’s why it’s so important to continue communicating with customers in your pipeline to keep gauging the need. That communication shouldn’t stop when you decide to launch a project. You need to keep monitoring and keep questioning the information you receive.

For example, Etzler expected one of InterCall’s new services to flourish by now, but he hasn’t seen traction in terms of revenue. In those cases, it’s a matter of following up with customers who indicated desire and making sure that the forecasts you founded your decision on actually happen.

“Instead of trusting the pipeline, we are having folks — even I, as well as the senior vice president of marketing — talking to that pipeline specifically to give them a little adult supervision to make sure that it will happen,” he says.

When you collect projected numbers ahead of time, you have something to track progress against later. Etzler measures revenue and margins both overall and for individual products. That way, he can quickly see if the margin is only a fraction of his expectations and put effort into picking up the slack.

“Part of the fun is I’ve got to make sure that we do what we say when we say it,” Etzler says. “So you really try to have some rigor around: Is this really what’s going to happen?”

How to reach: InterCall, (773) 399-1600 or www.intercall.com

Farbman Group employees

might feel the company’s care through the hands of an in-house masseuse.

It counts as a stress

management course at Farbman University, the development program that Chief

Financial Officer Andy Gutman helped implement to invest in the company’s 200 employees.

But really, the

employees fuel the program.

“Between having people serve as educators and crafting the

program around employee needs, we’re able to put together a good program that

is really well visited,” Gutman says.

Whether through

technical classes — like frequently used lease language — that enhance

professional skills or personal courses about investing and estate planning, Farbman

strives to give employees tools to succeed.

“We’re very focused on making sure that it’s not just a way to

get out of sitting at your desk and doing your work, that every class has some

meaning that ties back,” Gutman says. “We try to make sure that what we’re

offering really does add value.”

Smart Business spoke to

Gutman about creating a development program that builds better employees and a

better business.

Get buy-in with input. We know certain classes will happen

every year. Accountants get trained in depreciation out of necessity. So each

department has its own areas. Those are more of the hard classes that they have

to attend. Anyone can attend any of the classes; even if you’re not in

accounting, you can attend an exciting class on depreciation.

Then we try to tailor some of the others to be more about

personal growth. The big thing that’s been a topic for us is managing money. We

provide the staff with a variety of opportunities: wealth management, how to

deal with your 401(k), how to deal with the loss of a mortgage or potential

loss of your home. So we do some things that are strictly intended to improve

the quality of life for our staff.

We require them to engage in four classes a year — two of them

are required classes and two of them can be elective. That’s helped us with

getting the employee buy-in.

We do in excess of 25 to 30 classes a year. They get to pick

and choose, for the most part, which ones they go to. Some of them go to 10 or

more a year. They’re all done during the day so that they never have to

infringe on their personal time.

Usually about August of each year, I get together with our

supervisors [and] our HR director and we go through the current year’s courses.

We send out a survey to the employees to see what they think has been most

beneficial.

We take into account all the different factors: What’s proven

useful, what hasn’t, what areas we need new development in — [through] seeking

out supervisor input as to where their employees need assistance — and put that

together in a draft university schedule that we send around to the staff and

get their feedback about ones they might be interested in attending.

Train employees to teach. In our chosen fields, we really are

very big on our people teaching their area of expertise.

We really test the expertise of people. So if someone wants to

do a training class on a Microsoft product, we put them onto an online test

course to see how versed they are in that product. We do that to determine what

makes sense to teach internally.

We have done some training for our leaders who want to teach

in terms of how to actually speak in public. Maybe they’re not the best public

speaker, but they still are good at teaching the subject.

We do surveys after every class. We can get feedback from our

people to say, ‘I really didn’t learn a lot,’ ‘I learned a lot,’ ‘It was a

great class,’ ‘Here’s what could be done better.’

Uncover individual needs.

The old-school mentality in an organization was, ‘I can’t tell people where I’m

deficient because they’ll find someone who is more proficient.’ We’ve really

fostered a mentality that it’s OK to make mistakes and it’s OK to learn, and we

want people to learn.

It’s about building trust-based relationships with your employees

so that fear of telling you what their needs are goes away. When we first did

this program, we did 360-degree reviews … with our executive team. We put it

out in our break room. Everyone could read all the deficiencies of our

executive staff. If we were willing to put ourselves out there and talk about

where our shortcomings were, … that went a long way to fostering that.

We require every supervisor to meet with their staff members a

minimum of once a month. Usually the meetings are biweekly or weekly with every

one of their direct reports. So you’re never far away from their development

needs.

We try to structure either one-on-one development internally,

but more often than not, we’ll find a class outside of our program structured

for those individual needs.

Invest in employees. This

current economy has been a perfect example of why we need to strengthen the

personal skill sets of our employees. When people are losing their houses and

they’re stressed about that, how can you possibly be a good employee?

We can’t solve all that, but we can give them tips. We can

help them with finding the right people to talk to. If you can help them figure

out how to deal with the issues that they’re struggling with personally, their

focus at work is stronger and they’re able to be better, more productive

employees.

And they’re more appreciative. The buy-in you get to the company

when someone says, ‘Farbman Group took the time to put me in touch with someone

to help me out of my financial predicament,’ you can’t measure in terms of

dollars and cents.

But I can tell you, since we’ve started these programs, our

employee retention is spectacular. We’ve grown our leaders into teachers; they’re

more thoughtful in what they do every day when they know they have to explain

it to someone else. We’ve grown people who were introverted into extroverts,

and that’s helped us with our client interaction. When you entrust someone to

teach something that they love — even if they’re shy individuals — it’s

incredible how that gives them more confidence and helps them grow.

How to reach: Farbman

Group, (248) 353-0500 or www.farbman.com

Don Hairston doesn’t claim to know what the future holds. But he plans for the possibilities.

“Contingency planning is very important for people to realize that if there is a major change in the environment or in the regulatory atmosphere or whatever, they are prepared to change direction a little bit … and to still accomplish the overall goal,” says Hairston, the president of Molina Healthcare of Texas Inc.

As the first president of Molina Healthcare of Florida, Hairston grew the state-managed care plan to 43,000 members in a little more than a year. The organization, which provides health care to individuals through government-sponsored programs, tapped his start-up savvy and brought him to Texas in May 2009 to lead 158 employees through several expansion projects.

Since then, the Texas plan has grown from providing services in seven counties to more than 180. At the end of 2009, it reported about 40,000 members and premium revenue of $134.9 million.

Smart Business spoke to Hairston about building a flexible company around contingency planning.

Hire for flexibility. The most important thing to keep in mind during the early days of a start-up company relates to your early hiring decisions. It’s critically important to hire people that have the ability to grow with the company.

Asking questions about what they would do in certain situations gives you a good indication of how they would react. The questions that you would ask would have to do with certain contingencies because flexibility is very important. You ask a question, ‘If you were planning to do this and this happened, how would you react?’ so that you see their ability to react under pressure and to be flexible in what they do.

Plan for what-ifs. [Another] critical thing about start-ups is to do a lot of contingency planning. If everything goes like you expect, then your job is a lot easier — but that doesn’t very often happen. So the ability to anticipate what might go wrong and preplan for a way to resolve the issue can often make the difference between success and failure.

Part of that is a planning project management process where we put together in detail how something is going to be rolled out: This is what we want to accomplish. This is how we want to accomplish, and we have milestones as we go along. We have time frames and we monitor and manage the dates that things need to be done. Not only, in the project plan, do we have the deliverable dates, we have the person who’s responsible so we know exactly what various people are doing.

When we put something like that together, we spend a lot of time saying, ‘OK, here, we’re assuming that this is going to happen at this particular point. If it doesn’t, what if this happens? Then how would you work around the process?’ so that we get a lot of discussion about the future as we go along. When you have group discussions, people are very creative and they can think of a lot more possibilities than any single person could think of. So it’s a matter of discussing and not just one time, but discussing as you go along.

Instill contingent thinking. You demonstrate that if someone comes up with a plan, that it may not be the greatest idea but you certainly appreciate them coming up with it and you give them credit for that. Don’t be critical if the idea’s not one that you use, but be appreciative for the fact that they’re trying and they came up with an idea in the first place. What they came up with might not be the right answer, but it may spur an idea from someone else that does turn out to be the right answer.

You start not only coming up with some good ideas, but you get people used to thinking about, ‘Well, if it doesn’t work, what do I do then?’ so you increase the ability for people to be flexible.

By doing this contingency planning and showing how planning works and how to be flexible and ‘if this doesn’t happen, then you try that,’ you try to create a culture of flexibility and having the people thinking in an opportunistic way. Anytime there is a downturn in the economy, anytime there’s change, anytime there’s chaos, there’s typically an opportunity that’s built into that if you can find it. So we spend a lot of thinking about, ‘OK, things are not good. So how can we actually use that to our advantage?’

I think it actually increases optimism, to give them the confidence that even if something goes wrong, that they have a way of solving it. If somebody is going along assuming everything is going to go in a certain way and it doesn’t, then sometimes there’s some panic. But if you’ve talked about it and you’ve said, ‘We can get where we want to go a lot of different ways and so don’t feel like we have to go in exactly the direction that we’re going,’ I think that builds confidence as opposed to tearing it down.

Stay on watch. As you put a plan together, one of the things that you have to do at the beginning, and then at the end, too, is have an environmental assessment where you look at your business, your competitors, your potential market share, your products as well as economic and regulatory or legal issues. From that, you’re able to identify opportunities for growth.

Something that I would expect to see on a regular basis is what our market share is compared to the competitors, what our plans are and how we intend to improve that market share. So monthly reports — where you look at not only what your business is doing but what all the business in that area is doing — give you a sense of how well we’re doing compared to our competitors and our peers.

You do an assessment of what they’re doing that works. It’s a continuous process of trying things that have been successful, evaluating them and doing the things that are most successful and discontinuing things that haven’t worked as well.

How to reach: Molina Healthcare of Texas Inc., (210) 366-6500 or www.molinahealthcare.com

Friday, 25 June 2010 20:00

Kerry Kramp keeps Sizzler relevant

Maybe you were staring at the six-panel menu on the wall at a Sizzler restaurant when a 6-foot-2 man sidled up next to you and asked how you were making your meal decision. Maybe he asked why you even chose the fast-casual steak, seafood and salad restaurant chain in the first place.

If so, you’ve met Kerry Kramp, who took over Sizzler USA Restaurants Inc. in June 2008, inheriting sales declining as much as 20 percent year-to-year.

He observed the Los Angeles-based chain — first as a competitor when he helmed HomeTown Buffet Inc. — then more intimately as a Sizzler board member for two and a half years. He came into the role of president and CEO knowing what Sizzler had tried to be.

Now, he needed to determine what Sizzler should be.

He began like an average customer would, and he invited HomeTown Buffet partner Dennis Scott to dinner to the tune of a $52 bill and good-enough food.

“The value-to-what-you-got equation was a little bit off,” Kramp says. “So it began a course of discovery to try to understand what really made Sizzler tick — not so much where the direction had been in the past as much as where the guests wanted Sizzler to be.”

Kramp suspended franchise sales so he could evaluate the company from its core. He melded internal employee opinions with external feedback in an effort to rebuild the brand, keeping Sizzler relevant as customers’ expectations changed and, in many cases, their wallets thinned.

“It was to try to understand the uniqueness of this 50-year-old company,” Kramp says. “Where it had been and, really more so, where everybody wanted it to be and how to make it relevant to the consumers that we would need to be attracting in this new world order with the economy changed the way it has.”

Get close to customers

Kramp learned something standing on the customer’s side of the menu: To discover what customers want, you have to get in their shoes. Seeing your company from the customers’ perspective means, literally, standing where they stand.

So he stood in line with Sizzler patrons, saw the offerings from their vantage point and asked them lots of questions.

“From the guest side, first it was to really understand what was important to them,” he says. “It was looking at: How do the guests want to use us?”

Start by observing as customers use your service and talk to others about it. Kramp watched customers as they examined their 50-plus menu options — often appearing overwhelmed.

“People came in, they ate their food, they might comment on a few things, they’d say it was good and then they’d head out the door,” Kramp says. “So it was a really vanilla kind of experience, which normally would be fine — unless you’re in the worst recession in history, then vanilla doesn’t always work.”

After observing, step in to learn more about the customer’s thought process.

“I would ask them questions about how they were looking at the menu and how they were deciding what they wanted, and then taking that further to see how the menu related to them,” he says. “Were there items on it that they wanted? Did they come for anything in particular? It was back to that discovery about why do people come to Sizzler and does Sizzler offer the things that they want.”

When discovering what customers want, it’s tempting to resort to surveys and focus groups — which Sizzler conducted before Kramp came on board. But don’t limit your research to hypothetical preferences in lieu of actual responses.

“Instead of asking people about what they aspirationally might want, we started feeding them food and then getting responses from them as to what they liked or didn’t like, and kept trying to evolve the recipes and portion sizing and pricing based on their response to stimulus rather than just questions about what they’d like to see,” says Kramp, who appointed Scott as chief of strategic development to test menus. “You have to be true to that consumer and find ways to embrace them: ‘What are you willing to do? If you’re not willing to spend any more money, are you willing to have less portion? Or are you willing to pay a little bit more for better quality?’ If you don’t really engage the guest to be relevant to them, you may think you’ve fixed the problem but actually created a credibility gap.”

You can’t talk to every single customer, so in addition to direct interaction, keep an eye on data like sales volumes. Knowing what and how often they order certain things can keep you attuned to preferences, even if you don’t always have the anecdotal “why.”

“We kept our finger right on the pulse of the guests’ feedback,” Kramp says. “As they gave us indications of what they liked — either verbally or through the product mix, what were they ordering — we kept adapting our business to the direction that they wanted us to head in.”

Keep close to employees

Standing where customers stood was only half of Kramp’s discovery process. He also had to consider 5,500 employees and franchisees.

After just a few weeks in his new role, he held a “GM Get-To-Know-You” meeting with all the general managers. He wanted to hear what they thought of the company so he could start painting a picture of their side of the story.

Then, when he first met with the national franchise advisory group, they questioned him for a positioning paper on what they thought Sizzler should consider.

Kramp was stunned.

“I said, ‘I don’t understand. Why are we putting a positioning paper together? Let’s just talk about it. What’s on your mind?’” he asked.

As with customers, the key to getting employee feedback is getting on their level, not just relying on formalities.

“There’s absolutely a place for consumer surveys and formal methods of getting information — those are the ends of the spectrum,” Kramp says. “But I don’t know of any good decision that was ever made out of a boardroom that wasn’t better made in the dining room or in the kitchen of a restaurant.

“Leaders have to be directly engaged in the business to the point where they can really understand that the decisions they make are affecting the business — the employees, the profitability as well as the guests. You can’t lead from a corner office. You’ve got to lead from being out there where the business is actually done.”

So Kramp ventured to the kitchen to see whether cooks had access to all of the ingredients that they needed as they prepared meals. He noticed they had trouble keeping up with orders from such a diverse menu. Then, he observed how dishwashers handled the flow of dirtied dinnerware. He noticed cups piling up because servers delivered fresh refills after guests took a few sips of the first drink.

“It was really just finding out, ‘Do you have the tools? Do you have the understanding? Do you have the know-how, the training?’” Kramp says. “Is there a way to make their life better?”

Gauging what employees need to do their jobs should be ongoing and continually balanced with customer feedback. Kramp regularly tours stores to ask whether employees have tools to connect with customers, based on their own perceptions of what they think patrons want.

Kramp also engaged employees with daily food bars, where all employees gather around the salad bar before openi ng to go over the selections, discussing how it’s made and why.

“All of a sudden, whether you’re the cashier, the dishwasher or the server, you knew the food,” he says. “You knew what ingredients were in it, you knew why we did what we did. If you know that the ladle’s supposed to be upright and it’s not, you stop and make sure that the ladle’s upright. The employees began to take real ownership of the way that things were done.”

You start to empower employees by simply requesting their input and — regardless of their contact with customers — giving them an understanding of what your company offers customers and why. Once they’re empowered, they’ll be more committed participants in moving the company forward.

Stay in the middle

Thanks to the time he spent in the field, Kramp received input across the board. The challenge was deciding which ideas would work.

“If the guests would have wanted something that we didn’t have to offer — and we couldn’t execute it — then it doesn’t mean that you make your operation inefficient to chase after a guest,” Kramp says. “You go to the least common denominator of what’s the consumer coming to us for and what can we deliver at an exceptional basis. Surround yourself with things that fall within that sphere of influence.”

Sometimes, those intersections are obvious. Kramp knew customers had trouble deciding what to order from such a broad menu and cooks had trouble delivering, so it was an easy decision to eliminate 22 low-selling, hard-to-prepare items and re-engineer the quality of the rest. He had seen dishwashers struggle to keep up with extra cups while servers rushed to bring refills customers said they didn’t need. So he created refill stations where thirsty guests could top off their drinks.

But it’s not always that clear, so to rein in workable ideas, Kramp had employees visualize a golf course.

“I like to get my money’s worth in golf, so I use almost the whole fairway,” he jokes. “I go from the left to the right to the left — I just stop counting somewhere along the way.”

That translated to a safety zone for new ideas.

“We decided that we wanted Sizzler to be in the fairway,” Kramp says. “If you play the fairway, you always get from the tee box to the hole. You may not get there in the least amount of strokes. You may not get there as fast as somebody who takes shots over the sand traps or over the water hazard or over the trees. But we wanted to be safe in that we were consistent in what we delivered.

“If there was a way to shorten the route without taking too much risk against the business, then we were willing to take some of those deviations. We’re really open to movement from side to side within that fairway to try ideas.”

The measuring stick was long-term success through customer satisfaction. Kramp didn’t want employees taking drastic measures to earn extra profit this quarter if it wouldn’t align with the company’s core in 50 years.

Changes should encapsulate what customers want and what employees can deliver with quality. Still, results aren’t always predictable. So if franchisees brought ideas that didn’t seem too far off-course, Kramp tested it.

“We’ve got [184] restaurants, and to us, there’s [184] different places you can test things,” he says. “We would say, ‘OK, let’s take a couple of stores. Let’s do a product mix evaluation before you put it in. Let’s do it for four to six weeks and see what happens with guest counts and the profitability and the product mix.’ That began to show them where we were headed with respect to where the consumers were, and then they could buy in to what we were looking at.”

The key is to not prescribe a single solution.

“We created an environment that was really collaborative,” Kramp says. “We just wanted it to be right — not our way, not their way, but the way that the guest wanted it to be. We began to build credibility with our franchisees; they understood that we were in this for their interests.”

By building changes around customer feedback and employee input, Kramp overhauled the Sizzler brand, unleashing a value-priced menu with 35 refashioned dishes made fresh and often including the salad bar — previously a $3.99 add-on. Within three months, sales turned around, totaling $311 million in 2009. In February, he relaunched the franchise program, and he’s seen same-store sales increases in 14 of the past 18 periods.

Still, Kramp continues monitoring feedback to keep the company relevant.

“One of the biggest things that we learned is that you couldn’t go back to things that you had tried before that had worked at a different time,” he says. “It was really a time to look at things and break the rules from the past. But don’t do it in a vacuum, that you think you know what the guests want. Do it in a collaborative method to find out what makes you relevant in their life.”

How to reach: Sizzler USA Restaurants Inc., (310) 846-8750 or www.sizzler.com

It’s why Matt Hlavin turned his office into a giant dry erase board, and how Mike Waite keeps the cardboard box relevant.

 

It’s all in the name of innovation.

 

The topic of Open Innovation also brought a hundred of Northeast Ohio’s leaders together recently at the Baldwin-Wallace Center for Innovation and Growth. The panelists – Hlavin, president of Thogus Products Co.; Waite, president of Menasha Packaging Co. LLC; and Jackie Hutter, founder and principal of The Hutter Group LLC – shared how critical innovation is to keeping companies on top.

 

“Even a brown box can be innovative when you think about supply chain, how you bring it to market,” Waite says.

 

But that can only happen if you provide an atmosphere where your employees’ innovation can thrive.

 

“I have to make sure I give them freedom and latitude, and make sure I don’t shut them down,” says Waite, who personally answers his own phone calls. “I can shut that down by a wrong word, a wrong tone in a meeting. I tell my managers, ‘Try to have an open mind every day you come to work – how can you do it better and make it better?’”

While he’s open to ideas, Waite also points back to the process it takes for one to become reality.

 

“I always first say to them, ‘Have you talked to the people at your local level first?’” he says. “No. 1, that respects the people at the local level. It also points in a direction for a process, that I’m not going to be the one that has all the answers, even though I’m president of the company.”

 

When ideas bubble through that process, Waite runs them through some filters. Ideas must meet some criteria in terms of functionality, market, “runnability,” cost and sustainability. To make sure he sees issues from all sides, he runs suggestions through various departments to understand how each step of the process looks.

 

[Watch a video of Waite discussing how he creates an environment for open innovation.]

 

At Thogus, innovation is all about visibility. New employees are trained on identifying areas for improvement by watching a video of how the shop floor is set up or how a certain job is processed. Then they’re asked to identify: Why is this inefficient? What’s good? What’s bad?

 

“As they see what the problem is, the ah-ha light comes on,” says Hlavin, who revamped his shop floor with employee input.

 

To maintain that open environment after orientation, employees will be able to use an iPad at each machine to access YouTube videos of Thogus’s processes and leave comments.

 

They can also jot ideas on the office walls, most of which Hlavin has coated in dry erase paint. That way, even if an idea isn’t acted on, it’s visible.

 

“If you want to keep an open innovative culture, you have to see the ideas,” Hlavin says. “They may not have a great idea today, but that idea – two, three years from now – becomes pertinent.”

 

[Watch a video of Hlavin discussing how technology enables him to get ideas from employees.]

 

 

Hutter, who refers to herself as a “recovering patent attorney,” recommends looking even further outside of your organization for ideas – to patents.

 

“When you file a patent, you have to open your kimono and tell people what you’re interested in,” Hutter says. “You have to reveal to the outside world your business interests, research investments, corporate investments, core competencies and missing competencies.”

 

Though patents today are usually perceived as legal rights to your intellectual property, they were originally developed to spur innovation by disclosing information about other people’s inventions.

 

“It’s better for innovation if you know what other innovators have done,” Hutter says. “Innovation begets innovation.”

Patents reveal the innovator’s core competencies as well as weaknesses, she explains. You can look through those documented skill sets for opportunities where you could complement their weak spots. Patents can also illustrate how others have tried solving certain problems, keeping you from reinventing the wheel.

 

“Patents broadly disclose technology but narrowly claim the product,” Hutter says. “So you can start R&D on the 30-yard line instead of the end zone.”

 

But you have to remind yourself that it’s not just for innovation’s sake. Hutter encourages her clients to understand the difference between something that’s merely patentable and something that the consumer actually cares about.

“In a business sense, the reason you have an invention is because the consumer had a problem,” Hutter says.

 

[Watch a video of Hutter explaining how patents can fuel innovation.]

 

Interested in more innovation? Smart Business spoke with a couple of other leaders who attended the forum. See how they're innovating their companies.

 

Charles Rotuno, president and CEO, OEConnection

 

Tom Donelan, president and CEO, Heartland Consumer Products

 

Wednesday, 26 May 2010 20:00

The ‘we’ in leadership

There’s one letter Joseph V. Barna tries to leave out of leadership.

“I always tell people, ‘Forget the ‘I’ word and adopt the ‘we’ word,’” says Barna, principal of CRESCO Real Estate. “When you hear owners of companies and it’s, ‘I did this, I did that,’ it drives me crazy, and it negatively affects the morale of the company.”

By replacing pronouns, Barna strives to boost engagement by seeking input from his 26 employees and involving them in problem-solving.

First, before you can expect employees to open up, you need to gain their trust. That starts by proving your credibility.

“I would never implement a policy or a strategy or a goal that I wouldn’t do myself,” Barna says. “When you’re doing it and you’re taking the lead and people see that it’s getting done by the management, you build credibility.”

But as credible as you may be, employees won’t trust you if you’re distant. You also have to develop personal relationships.

“Take an interest in the people. Know a little bit about what they do outside the office,” Barna says. “It’s good to know what their family’s about, if their kids are playing baseball. So when you’re talking to your employees, it’s not necessarily about work but it’s like, ‘What’s happening with you? How’s Johnny doing in Little League?’ When you start to develop that type of relationship, you build that trust.”

Barna asks simple questions while walking through the office like, “What’s keeping you up at night? What’s bothering you? What can we change?” Initiating conversations comes with the caveat that you’ll actively listen to the feedback.

“It means that you’re gathering information instead of shooting from the hip, giving information that you probably don’t know that much about,” he says. “You’re much more effective when you listen to the people — I call them the foot soldiers. Go to the people that actually do it hands-on and have an open conversation with them.”

If you’re trying to streamline a billing process, for example, you’re better off asking your billing coordinators than trying to handle it yourself. Barna even calls trusted advisers who lead other companies and asks their billing coordinators how they’ve mastered the process.

You start with digging expeditions to uncover frustrations, then asking front-line expert employees for their suggested solutions — but hopefully you foster ambitious problem-solvers along the way.

[See Barna talk about using 'we' in leadership on video]

“I would rather people come to me and say, ‘Here’s the problem. I looked into it, and here’s three solutions, and of the three, here’s the one I think will work,’” Barna says. “It’s a lot easier to do things that way than for them to come and say, ‘This doesn’t work.’”

But trust goes both ways. It’s not just about them opening up to you; you also have to trust that they’re giving you viable solutions. It’s easy to believe your IT tech who’s been with you for 20 years, but it is more of a process with newer employees who haven’t proven their problem-solving abilities.

“If they’re not proven yet or I don’t have the same level of confidence in them, then I know I’ve got to investigate other solutions,” Barna says. “Or I just get to the second- or third-level questions: Why? Are you sure? What makes you think this?”

Not only does involving employees bring better solutions, but it also improves morale and buy-in.

“When you include the employees in all aspects of looking for solutions to problems, you’re promoting morale because they’re part of the process. It’s easy to get employees’ buy-in,” Barna says. “You’re also fostering an environment where they start to think about solving problems before they become problems.”

How to reach: CRESCO Real Estate, (216) 520-1200 or http://www.crescorealestate.com/ or http://www.barnacaplan.com/

Keep it balanced

As important as it is for Joseph V. Barna to build personal relationships with his employees at CRESCO Real Estate, it’s also crucial that he keeps work and personal life separate and balanced.

“It’s getting much easier due to technology,” says Barna, a principal at the Cleveland company. “Between my BlackBerry, my laptop and one of those little air cards, I can be anywhere and conduct business. So there’s no excuse.

“It’s kind of a bad thing, too, because when clients know that you’re connected and they reach out to you, you can’t say you were traveling for two days. They know you’re getting your e-mails.”

To keep work from running into your personal time, revert to traditional tactics.

“You just have to do it the old-fashioned way and set time aside,” Barna says. “You just block it out.”

At the insistence of his doctor, for example, Barna made a commitment to get to the gym four days a week. So he sets his alarm for 4:30 a.m. and knocks out exercise first thing in the morning. Also as an avid fisherman, Barna — who happens to live right on Lake Erie — blocks out time in the summer for fishing trips. To make up for it, he works some winter weekends in anticipation.

“I don’t miss a beat because I have competent people in the office,” he says.

Thursday, 06 May 2010 07:04

Dunkin’ Donuts grows by franchisees

Nigel Travis knows there’s a recession going on, but it’s not obvious when he looks at Cleveland-area Dunkin’ Donuts. Local stores have seen like-for-like sales increases for the last six consecutive years. And in the last five years, 14 local franchisees have opened 27 new stores, bringing the total here to 47. 

That’s a drop in the bucket of the global growth of Dunkin’ Brands Inc. — which operates both the coffee-and-doughnut chain and Baskin-Robbins — where Travis serves as CEO. Systemwide sales for the 15,393 locations worldwide totaled $7.2 billion in 2009.

But there’s something special about Cleveland, and Travis recently left the company’s headquarters near Boston and came to town to learn the secret.

“I think it’s great franchisees who have focused on the community, given great service, given products of value,” he said from a new location of Dunkin’ Donuts, where he doubles as president. “That’s the magic difference.” 

He defines a great franchisee as someone who understands the local community and is well-trained on the corporate brand. So maybe the better question is how do you identify great franchisees?

“If you ask people about what was important in the restaurants or even retail stores they go in, they will very quickly tell you what’s important to them,” Travis says. “You can deduce from that how focused they are on consistency, focused on quality, value.”

Also ask whether potential franchisees are willing to get out in the community to propel the brand. Sometimes, that’s as simple as explaining your expectations to illustrate what the job will entail.

“At another brand I worked at, I used to speak to all the new franchisees and I told people how hard they had to work to maintain the product, how hard they had to work to get out into the community — a lot of foot-slugging as I call it,” Travis says. “Two people actually left because they didn’t want to put that kind of dedication into running their franchise.

“If you’re focused enough on the attributes you’re looking for, which is really hard work, focus on quality, being involved in the community, making sure that you have a consistent product … I think you can very quickly deduce who you should have in the system or not have in the system.”

[Read a blog about Dunkin's remarkable growth in one local market]

That due diligence is necessary for finding franchisees who will keep the brand consistent. But there’s a difference between consistency and stagnancy. Especially in an economic climate like this, you need to constantly innovate and improve your brand. Those ideas will often come from franchisees.

“I think too many people have too closed a mind: ‘There’s only one way of doing things,’” Travis says. “If you recognize that it’s about steady, gradual improvement and that ideas come from people who really know the business — I mean, let’s face it, franchisees know the business day-to-day better than I do because they’re out in stores, they’re dealing with our guests, the guests tell them things, they’re getting feedback. So I think if you have an open-minded approach, you’ll come up with the right solution.”

Still, not every idea gets a green light. There’s a disciplined thought process between feedback and the right solution.

“I always put it through a sift,” Travis says. “Does it help us make more money? Does it help all franchisees rather than just a few?”

When you have franchisees focused on the right values and you listen to their input, you have a recipe for success. 

“It’s listening to the challenges and the points of view that come from our franchisees that’s key,” Travis says. “If you do that, it’s a bit like a team. It’s a two-way dialogue. If you are working together, you can go out there and you can attack whatever economic problems are out there.”

Follow the numbers

Once the expectations are in place, along with the people you think can meet them, you have to make sure your standards are being met. What gets measured gets done may seem trite, but it’s key to maintaining a consistent brand.

Along with regularly measuring the quality and consistency of service and products, Travis throws in a few surprises to keep franchisees on their feet. 

“Tonight I’m going to be going to another market and making some unannounced visits,” he says. “So I just turn up and see how the stores look.”

In addition to those little things, Travis keeps a constant eye on the broad metrics — most importantly, profitability.

“No one will grow in an economic environment like we’ve had unless they make money,” he says. “You have to be totally focused on making money. You have to make sure that you also deliver value.”

Metrics shouldn’t just be on your mind once a quarter. That awareness starts first thing in the morning, every morning.

“It means getting up early in the morning, looking at yesterday’s numbers,” Travis says. “This is a retail business; you’ve got to know what the numbers were yesterday. … It gives you trends that you can focus on, weaknesses and opportunities. And through that analytical approach, particularly in a retail business like this, I think you’ll be even more successful.” 

How to reach: Dunkin’ Brands Inc., (781) 737-3000 or www.dunkinbrands.com; www.dunkindonuts.com, www.baskinrobbins.com

 

By the numbers: (2009)

Dunkin’ Brands Inc.

$7.2 billion in systemwide sales

15,393 locations in 46 countries

9,163 U.S. locations in 47 states (including Washington, D.C.)

1,126 corporate employees

1,896 U.S. franchisees

Dunkin’ Donuts

$5.7 billion in systemwide sales

9,186 locations in 31 countries

6,566 U.S. locations in 33 states (including Washington, D.C.)

Sunday, 25 April 2010 20:00

Adapting to the times

Daniel Touizer doesn’t claim to possess psychic powers. If he did, his job as chairman and CEO of Cinergy Health Inc. would be a lot easier — especially when health care reform could potentially alter the health insurance agency’s future.

He has to rely, instead, on other methods to stay aware of what’s coming down the pike and how it might affect his $85 million company.

“I’ve learned that it is extremely important to stay ahead of the curve with what you can control,” says Touizer, who leads 225 employees. “Stay on top of your industry, take care of your employees and your customers and always keep your eyes open for new opportunities. This is what will set your brand apart from your competitors no matter what is happening in your industry or the economy.”

Through direct customer interaction, focus groups that explore the competition and other feelers throughout the industry, Touizer stays on top of changes while building a more flexible company.

Smart Business spoke to Touizer about adapting your company to changing times.

Stay up to date. Things can change that are beyond your control. You could … have to adapt to running a business during a recession, new technology could be introduced into your industry or new government regulations could be put into place. 

The best way to overcome this challenge is to always be up to date and prepared. Conducting research about your industry, your competitors and your customer base will allow you to adapt to change within your industry more quickly and effectively. That research will not only prepare you for working in a changing industry, it will also help you stay competitive and attract new customers.

I read pretty much everything: major newspapers, trade publications, news channels. Go to conferences in the industry to learn about the trends, opportunities.

A good leader can actually select certain things — publications, newspapers or the such — that he believes are good materials to read and to stay on top of on a weekly, a monthly basis, and make sure that anyone he feels it’s necessary for receives a copy every month. Everybody needs to read it and bring it up in some meetings so people can share ideas.

Social media has helped us. A lot of the competitors have social media pages with Facebook and Twitter. We get a lot of feedback from what their customers want, what they’re happy about, what they look for. And we have our own social media where we get feedback from our own clients. That’s where people are very open and they really share their experiences, so you can get a lot of good feedback.

Borrow from competitors. You need to always do the research and stay on top. The only way to stay on top is to dig in, to really get the experience that people experience dealing with your competitors.

I do a lot of secret shopping to my competitors to stay up to date on what they’re doing. We have focus groups that call and purchase products from competitors and get feedback on how they market, what they’re marketing, their price points and whatever edge that they have. [We look at] how customers are treated, how long it takes for customers to stay on hold when they call a competitor, how long it takes for customers to receive their materials in the mail, whatever we want to stay on top of.

Just see how they deliver the message. We look at other TV commercials and we study other advertisements to see how we can formulate certain approaches that can better our product from where it’s at right now. We try to incorporate a little from everybody to give us what we want to be the perfect strategy to attract customers and sign them up to our plans.

I get feedback [from the focus group] on what caught their eye, what made them jump up and have an interest. And then I combine all that with everything else I take in from going to the shows and speaking to industry associates.

Adapt strategies. [It’s] looking at competitors’ offers and seeing how you can enhance your offer by adding or subtracting something here or there.

First, we put what we have to offer against what they have to offer. And then we try to add in whatever we can from our competitors’ offers into ours without changing it too drastically. So we don’t just copy people; we look at what they’re doing to add into our marketing to increase response and increase our sales.

For example, you might see a company advertise a free offer of some kind, so you can look at things like that. Maybe you want to implement some kind of a free offer or free trial or extra benefits.

You can always learn from your competition. They’re also out there working hard, thinking about how to increase revenue. You can’t really be close-minded to thinking that what you’re doing is the only way and the best way. Try to improve your business at all times, and part of that is staying ahead of the competition and always knowing where they are and what they’re doing.

Listen to customers. We actually call our customers and have a one-on-one with them. Just ask them how everything is going with the product, with the service. How we can better the product and service? How are the customer experiences when they reach out to us? They love giving feedback because they feel that we’re concerned about making the right changes for them to have a better experience.

So we take that research and then we figure out how we can apply that specifically to our customers. We come up with solutions to make certain changes that will benefit the company and, of course, the clients.

It’s important to listen to what their needs are. Then we go back to the drawing board to see if it’s cost-effective to implement certain things. Once we see something is cost-effective and would also answer the needs of a lot of the concerns that we’re hearing about, then it’s a good match. If everything comes together at once, then you can make certain changes that are good for the company and for the customer.

How to reach: Cinergy Health Inc., (800) 847-9151 or www.cinergyhealth.com