Brooke Bates

David Fisher doesn’t mind if companies act a bit like pigs. Healthy growth can be good.

But there’s a fine line between a robust appetite and the route to the slaughterhouse. Before Fisher became the CEO of optionsXpress Inc., he heard the analogy all the time from his previous boss, the CEO of Potbelly Sandwich Works.

“Pigs get fat. Hogs get slaughtered,” Fisher says. “It means it’s OK to want things and to want to go bigger and to want to succeed and to fight for your position, but there’s a limit. You should always understand that limit and not try to be too greedy.”

Fisher considers new market opportunities while remaining mindful of where the limit is — beyond the core focus of optionsXpress, a Chicago-based online stockbroker for retail investors. He weighs every opportunity against its focus on the retail customer base, which has driven the company’s success.

“What I keep on coming back to is how we got to where we are today,” says Fisher, who has more than 400 employees. “What was the basis of our success? It’s always been the focus on the retail investor. That’s where we’ve really been able to differentiate, where we’ve really been able to excel.”

The company’s customer assets increased to $7 billion in 2009, up 43 percent from the prior year and 20 percent from the firm’s record high, which came before the financial crisis. Its number of accounts continues to increase steadily, as it had more than 360,000 customers in May.

If you ask Fisher, it’s all because the company stays glued to its core. Here’s how he maintains focus to drive growth.

Evaluate opportunities

A strict diet can keep a pig from becoming a hog. Fisher continually evaluates what makes his company healthy so he knows how to keep it growing beyond 2009 net revenue of $233.4 million.

“You have to figure out why you’re different,” he says. “Why have you succeeded? Why are you succeeding where others haven’t? What differentiates your company from others? Start with those core questions.”

Fisher found answers when he took his management team off site. But their perceptions just reflected what customer feedback already revealed. Customers are the best source for defining your differentiation.

“How you are differentiated is clearly based a lot on what your customers are telling you,” Fisher says. “That’s just through: Are you growing your business? Are your customers happy? Are you getting more customers than you’re losing? What are they telling you as part of research? How do you stack up against your competitors? How do you stack up against where you were a couple years ago? Understanding what your customers think about your business is critical.”

Fisher’s team deals with several thousand customer interactions daily. The team stores and analyzes feedback to find patterns in customers’ perceptions and problems. The team also conducts annual industrywide surveys to see how the company stacks up against competitors.

That information reveals your core through the lens of why customers prefer you over the competition.

“It’s a lot of data-mining and statistical analysis, using tools to help sift through the data, finding those patterns,” Fisher says. “A decade or two ago, you would have had to sift through those very manually. Today, there’s great software that really helps identify patterns in customer interactions.”

That’s good, because that data is only half the equation. You also need to track larger industry trends to make sure you’re positioned for growth within your core.

“If you say, ‘This is our core area of focus,’ you need to understand the opportunity there,” Fisher says. “It does you no good to have an area of focus that has zero additional growth. It’s understanding what the market looks like today. How fast is it growing? Understanding how large the opportunity is is extremely important to telling you whether or not you should keep building in that area.”

The prospective customer base can help determine growth opportunities.

“We also look at it from the customer perspective, the demand,” Fisher says. “How many retail customers are out there? How many of them are using these products? Where do we think we can penetrate into by looking at the type of customers that are out there, their demographics, how they compare to the demographics of customers using the products today?”

Fisher looks at options and futures volumes in the market — and at customers who trade them — and then forecasts trajectories. Of about 40 million people trading online, only 10 percent currently use options and futures products, leaving untapped potential in online investing. With obvious room to grow, it makes more sense for optionsXpress to continue expanding its core focus than to get distracted by new offerings. When you control significant market share, then it may be time to branch out.

Staying committed to the process of evaluating — and re-evaluating — the differentiators that define your core can keep your company healthy.

“You’re trying to take a lot of numbers and a lot of statistics and a lot of data and then trying to make predictions based on where the industry has been and where you think it’s going,” Fisher says. “You’re not always going to be 100 percent right, but that’s why you have to keep re-evaluating it. You don’t make a decision saying, ‘This is our focus,’ and then lock it in a safe for the next 10 years.”

Make your core clear

Once you’re sure about your core, get your employees on board with clear, constant communication.

“Internally, it’s just part of the dialogue,” Fisher says. “When you’re going through development projects, strategic planning, the budgeting process for a year, find opportunities to say, ‘How does this fit into our retail focus? How’s this driving our retail business?’ [It’s] letting people know that those retail-focused projects are where we’re going to be spending our time.”

When employees suggest ideas, the expectation is that they’ve already considered that core focus. Employees are less likely to fight it or step outside of it if you’ve clearly explained what your core is and why.

“A lot of that goes to the upfront messaging,” Fisher says. “You can’t just say, ‘We’re retail.’ You have to explain why and engage people in that; why is that the decision-making?

“People know this is our core. This is where we came from. This is what we’re better at than anybody else and here’s why. If you walk people through why that’s your focus, you don’t have to spend as much time defending it throughout the years.”

While communication about the core is built into every planning process, Fisher also finds ways to sneak it into everyday announcements.

“Almost any time I send out an e-mail to the company — no matter what it’s about, it could be the date of our summer happy hour, an award we’re getting, a promotion — I always try to talk about our focus on the retail investors and our focus on innovation,” he says. “You can’t try to communicate 10 things at a time. So I’ve really focused on communicating our core retail business — that’s what’s generated success [and] that’s what’s going to generate continued success.”

The key, regardless of how you communicate, is that you do it relentlessly.

“It’s almost impossible inside a corporation to overcommunicate,” Fisher says. “People are focused on their day-to-day tasks. When you’re trying to get some of these bigger ideas across, you might be thinking about them every day but not everyone else in the company is thinking about them every day. You really have to communicate to the point where you’re just positive you’re overcommunicating, and then communicate even a little bit more.”

The more you communicate your core, the easier it gets. By keeping distractions at bay, you can actually add value to your core.

“At the board meeting, the conversations stay more focused around the core as opposed to getting questions, ‘Why aren’t we doing this?’” Fisher says. “Now that we’ve done a better job defining and communicating our core, it actually helps to keep the meetings focused on trying to add value around our core.”

Measure opportunities against your core

Now your organization is rallied around your core. But the real test comes when an opportunity crosses your desk, because you have to decide whether it fits your focus.

That happened to Fisher about four years ago when the company contemplated expanding beyond its major products — mostly options, along with stocks, bonds and mutual funds — to futures and cash foreign exchange.

The first question, obviously, is whether an opportunity lies within your core.

Both futures and foreign exchange could be retail products, so they passed the initial test.

If an opportunity appears to be in your core, then you compare and contrast it with your current offerings.

“They were a little different product than we were trading,” Fisher says. “We started saying, ‘How are these products alike, and how are they (different)?’ and that led us to our decision-making.”

Futures, for example, are exchange-traded and centrally cleared. To optionsXpress, which traditionally acted as a pure broker and earned commission on trade, buying and selling futures wasn’t much different from buying or selling options. Because of the similarities, the company picked it up. Futures now make up 20 percent of its business.

Foreign exchange is not centrally cleared. It’s traded dealer-to-dealer without commission. It looked very different from the current offerings, so Fisher steered clear.

If you’ve clearly defined your core already, it’s less challenging to spot outliers. You’ve already established a measuring stick for opportunities and a reasoning to explain your decision.

“When you’re communicating internally, it’s all about the company’s goals and how does this fit into our goals. It’s not personal,” Fisher says. “If you’re making a decision internally, it’s not because this manager is better than that manager or this project is better than that project. It’s about what are the goals and what best matches up with our goals?”

Saying no gets easier when you use that consistent model and even easier after you make mistakes.

“All you’ve got to do is once or twice go down that path and see how distracting they are, and then you realize you just don’t want to do that,” Fisher says. “That’s the advantage of having spent the time really defining that area of focus is that now it is easier to say no. It’s not making some arbitrary decision: ‘My gut tells me no,’ or doing more and more research to try to prove to yourself. No, it’s just, ‘Look, this is not what we’ve decided should be our core area of focus.’”

Don’t be afraid to say no to opportunities when they don’t fit your focus. Consistency in decision-making will convince the organization that you’re intent on sticking to your core.

“You say no a couple times to those types of projects and people start getting the idea that, ‘OK, this really is our focus and if I want to succeed, that’s where I need to spend my time,’” Fisher says. “The limiting factor is our time, and any time you’re spending outside your core focus is going to take away from your success.”

Saying no to customers can be more difficult than telling employees. It takes a different approach but the same guidelines.

“When you’re talking to customers, it’s always personal, because it’s personal to them,” Fisher says. “So you always need to have it focused around the customer: ‘I understand why you want this project, this tool, this decision, whatever. I understand why that would benefit you. I understand that you think that’s great, and you’re right, this would be a great idea. We’re not going to be able to do it right now because of X, Y and Z.’ You have to acknowledge that it’s more personal when you’re dealing with those customers.”

As long as you’re clear and consistent about your decision in terms of alignment to your core focus, people will get it.

Then, it’s on to the next opportunity and the continual re-evaluation of your core.

“The easiest mistake is to get too locked into a decision,” Fisher says. “You want to make sure you’ve defined your core and you’re sticking to your core, but you’ve also got to give yourself the opportunity to reevaluate it from time to time so you don’t end up going down a dead end.”

How to reach: optionsXpress Inc., (888) 280-8020 or www.optionsxpress.com

At the start of Kathy Scherer’s career, her path seemed simple. The ladder above had a set direction and a certain length.

“I sort of thought that when you got to partner, that was it,” she says. “You were on a flat-line once you got there.”

Now, after more than 10 years as partner at Deloitte Tax LLP, Scherer knows better. That ladder is more like a lattice because development and growth happen constantly in every direction.

“The really surprising thing to me is how I’ve had to keep redeveloping myself and reinventing myself to do different things,” says Scherer, Midwest regional tax managing partner.

That philosophy of continual development is prevalent at Deloitte. It’s a priority that underlies the culture and feeds the business model.

“Talent development for us is critical because we don’t have hard assets,” she says. “We’re not like a manufacturing company. Our business is really two things: It’s clients and people. For us to be able to deliver to our clients, we have to have the best people and motivated people and technical people and people that think innovatively. So for us, it’s very much a cornerstone of our business to develop our talent.”

To foster growth in her 1,151 employees, Scherer supports development as an informal ingredient in the firm’s overall culture and devotes resources to more formal training to customize each person’s growth track. As employees hone their skills, the level of service they provide continually rises, in turn growing the business.

“At various points in your career, you’re going to need to have different competencies to continue to progress,” she says. “What got you where you are today isn’t going to take you where you need to go tomorrow. You always need to keep developing.”

Individualize learning

Scherer’s employees don’t all see the same ladder she envisioned 23 years ago. When you consider the demands of various positions and the individual skills and preferences within those, the development path gets less predictable.

“People don’t necessarily want to just climb straight up a ladder,” she says. “Figure out ways to provide them flexible ways to advance in the organization.”

Let employees participate in planning their development. Deloitte employees work with counselors — who are usually part of their team — to set individual goals.

“Having it part of the goal-setting and evaluation process is very important,” Scherer says. “That says to the younger people that not only are we grading you on the chargeable client hours or on other hard metrics, but we’re also evaluating you on your ability to take learning seriously.”

Keep personal goals within corporate expectations by building a framework. Deloitte’s planning form breaks goals into four categories — technical aptitude, industry knowledge, professional skills and leadership development — and outlines capabilities employees should possess in each.

“Everybody’s getting (those four areas) all the time, but the emphasis and focus around them will be very different depending on what level you’re at,” Scherer says. “For a brand-new staff person, they’re going to be much more heavily weighted toward the technical side.

“The form will change, obviously, as they move up. As a manager, we’re expecting them to get proficient in soft skills like leading a team and communicating effectively. As they get further into the manager level, maybe it’s business development.”

You may not know each position’s detailed skill sets, especially in a larger company. Pull in subject matter experts who do to articulate expectations and design coursework around those skill sets.

Then let employees set the pace and direction of their growth. Instead of fostering a strict “up or out” culture, Deloitte encourages individualized development through Mass Career Customization.

“MCC stands for the proposition that everybody has their own ability to develop their career path, how quickly or how slowly they want it to go,” Scherer says. “Individuals decide whether they want to be dialed up on a fast career path or dialed down, which may be a more flexible arrangement or a reduced workload arrangement or what we call common profiles … a mainstream progression.”

Instead of moving from senior staff to manager, an employee might want to pursue an opportunity developing another business strategy at the company. Just because they’re not climbing the ladder doesn’t mean they’re not developing.

“You might be moving sideways instead of straight up, and that’s OK,” she says.

Offer development options

When Scherer attended school, she often sat in a classroom, listened to lectures and viewed slides on an overhead projector. But that’s not everyone’s preferred learning style.

Deloitte spent several years re-evaluating how adults learn.

“What we found was that, especially with our people coming in today, the old-style lecture format … the traditional classroom-style learning, that isn’t necessarily the best way or the only way for people to learn,” she says.

After employees set developmental goals, offer plenty of options for them to achieve those goals. Deloitte mixes live and virtual training with indirect growth opportunities.

Technology has morphed the traditional classroom. Deloitte uses an online platform loaded with interactive tools.

“You definitely have a risk when you’re doing something that’s more Web-based that people will lose interest,” Scherer says. “It’s hard to gauge whether or not they’re learning because you’re not sitting there right in front of them. … There’s a bunch of different tricks that we teach people in a virtual classroom, where you can call people out and you can have them write on the board to show that they are actually getting a concept.”

Those tools include chat boxes for asking private questions and whiteboards for public sharing. Employees can also request the microphone to speak, raise their hands to be called on or applaud to show interest.

The physical classroom is also becoming more interactive through case studies, simulations and hands-on practice. At milestones, such as promotions to manager or partner, Deloitte employees receive actual client proposals and work in teams to prepare mock oral presentations. Then, they receive feedback from superiors.

“When we do those types of simulations, we get the leadership at the highest levels of our firm to participate in those — which not only is a great experience for the participants going through it, but it also helps reinforce this culture that learning’s important because they see our top leaders in the classrooms with them,” Scherer says.

Employees will echo executive commitment, so get involved. Don’t just attend; be attentive.

“We really encourage people to be there and be fully present,” Scherer says. “So turn your BlackBerrys off. Don’t bring your computer to class. We really try, if we’re there facilitating, to do the same. We’re not cutting out on an early flight, but we’re staying there until the end of the training. When people see the leaders doing that, they know that it’s more than just us saying that development’s important — that we’re actually living it too.”

Other informal opportunities can drive development into your culture. Deloitte offers Global Development Programs where employees can take assignments across the organization to get experience in diverse cultural environments — similar to studying abroad.

The CEO also holds quarterly diversity think tanks with senior managers.

“You gain a bunch of skills there, not only just the awareness of the issue but the ability to present something to the CEO of our company,” Scherer says. “That helps them to learn executive presence. A lot of times, too, they may take on projects that require them to work in a team, not only within their function but cross-functionally.”

Community involvement also contributes to development. Deloitte employees participate in an annual Impact Day to serve local organizations. It may be painting a school, but Scherer often seeks opportunities that hone business-related skills: preparing tax returns, conducting mock job interviews or presenting tax updates to small business owners.

“Getting involved in aspects of the business outside of just pure client service delivery [is important],” she says, comparing it to the balance of educational experience with extracurricular activities on your first resume. “Client service is the most important thing that we do, but we think that people actually are better client service professionals if they are doing some of these other things.”

Check progress

Before and after course evaluations can gauge employee development in certain areas, to some extent. But scores alone can’t reveal nuances of individual progress. That requires personal interaction.

“It’s important to set goals and then it’s important to provide honest feedback against those goals,” Scherer says. “If people aren’t progressing against those goals, then you really need to try to determine the root cause of it. People develop in different ways and different experiences affect them differently, and so you really have to, as a counselor, get underneath that.”

Initially, counselors are assigned to employees for biannual checkups. But the key is to be flexible — let employees choose new counselors and recognize that mentoring isn’t up to a single source.

“We definitely try to spread out the counseling responsibilities and instill in our managers that it’s everybody’s responsibility to be a counselor and to be a mentor,” Scherer says. “While someone may not be a formal counselor, they can still be a mentor.”

Deloitte offers periodic counselor training to refine skills. But generally, it comes down to three things.

“The first thing that’s really key is listening,” Scherer says. “We all like to go into meetings and have agendas and say our own things, but the first point is really getting that gut check with the person that you’re counseling and finding out how they think they’re doing, where they’re at.”

Listening means really digging in and asking employees to elaborate.

“Take a lot of notes and then come back and try to clarify points that you don’t understand,” Scherer says. “Sometimes, particularly when people are having career issues, they might not be able to articulate … what it is that’s causing them to not be able to meet their destination.”

For example, if your mentees have difficulty expressing themselves in a group meeting, find out what that means.

“Explain a situation to me where you were in a group setting and you weren’t able to present a part of the agenda and you wanted to do that,” Scherer might ask. “Why was that? Was it that your partner didn’t let you do that or you didn’t feel confident doing it or you didn’t ask your partner to do it?

“It’s really peeling back the onion and trying to figure out exactly what those root causes are. Then try to put together a plan to help a person get through a career issue that they might be dealing with.”

The second secret to effective mentoring is giving honest feedback, which is especially difficult when conducting a bad review. Scherer offers to sit in and show new counselors an example of how she handles tough conversations.

“Usually what I try to do is to talk through what the developmental points are — that’s how I refer to them — and acknowledging that we all have them,” she says. “Then try to put specifics around things that they can do to improve upon them. We always, when we’re giving feedback, want to try to then match it up with something that’s very tactical that they can do to help develop.”

If employees score low on a post-test, don’t dodge it. Address it, maybe sprinkling in a weak spot of your own, then suggest specific fixes. If they’re struggling on technical skills, for example, external classes may help. The more specific opportunity you can provide, the better — which leads to the third key.

Good counseling means connecting the dots. Stay informed of different opportunities within the company so you can match needs with solutions.

Scherer encourages mentors to reach out to others to feed a broader awareness of offerings to keep their mentees informed of opportunities.

That personal attention reveals the difference between an employee approaching burnout or thriving on additional responsibilities. It determines whether you should reduce their client load or simply encourage their hard work.

“There’s usually not one thing that we want them to be focused on,” Scherer says. “It really gets to what they want with their career development and then really working with their counselor to figure out the different experiences that will allow them to get to where they want to be.”

How to reach: Deloitte Tax LLP, (312) 486-1000 or www.deloitte.com

Jim McCluney calls his company a survivor.

That’s putting it lightly.

Emulex Corp. (NYSE: ELX) has done more than merely survive. In fact, it’s grown by leaps and bounds — more specifically, by acquisitions, partnerships and diversifications.

McCluney came on board through the acquisition of his company, Vixel Corp., in November 2003. He was named president and CEO in September 2006, and since then, he has continued expanding the offerings of storage networking convergence solutions.

“The company’s been around for 30 years, so it’s been through a number of economic and technology transitions,” McCluney says, clarifying his definition of survivor. “It’s had the flexibility and determination to move into new directions many times over its life.” But none of those transitions are haphazard, no new directions unplanned. Everything ties to a strategic vision.

“If you don’t know where you’re going, any direction’s fine,” McCluney says. “You really need to understand where you want the company to be three to five years down the road. And to do that, you need a good understanding of where the technologies and markets and customer pain points are, and then have a very clear understanding of what capabilities and intellectual property exists within your own company.”

Setting that path ahead of time helps McCluney make decisions about new opportunities and challenges — like when, in April 2009, Broadcom Corp. made an unsolicited takeover bid to acquire Emulex.

“That was incredibly challenging because we had to not only stay on plan and deliver what we needed to deliver for this new market and a growth trajectory, but at the same time, defend the company,” McCluney says. “I spent a lot of time out on the road with investors, articulating our strategy and convincing them that there was a better future for Emulex than what the hostile bid was offering.”

Put out feelers

Knowing your direction starts with knowing what the road around you looks like.

“It’s so easy to get trapped in the daily [or] quarterly grind,” McCluney says. “You need to take time to get out and really understand what’s going on in the world.”

At Emulex, different employees have different lenses to look through, whether that’s international markets, technology trends and advances, partners’ investments, and so on.

Customers are the best source of that information. McCluney and his executive team visit big customers — both original equipment manufacturers and end users — at least twice a year.

When you touch base with customers, you’re looking for insight into how they use your company — but you’re also digging deeper than that.

“I’m always asking how they’re doing and what their views of Emulex are. I think it’s very important to hear firsthand and that can be everything from operational things to the quality of the products as well as the quality and interaction of our people,” McCluney says. “And we’ll talk about markets and market trends and technology. I like to hear from them what their challenges are and what they’re trying to achieve.”

When you ask those kinds of questions, customers will expect the same kinds of answers from you. So McCluney goes in prepared to share Emulex’s goals, investments and road maps as well as trends he’s seeing in the marketplace.

That will help facilitate information and ideas from them — sometimes, making it pretty easy to determine your direction.

“Sometimes customers come to us with problems and say, ‘Hey look, if you could solve this, I’d be really interested,’” McCluney says. “That’s why I think it’s so important to stay close to your customer base; you learn things and occasionally we get some real breakthrough ideas.

“For instance, over the last several years, a big theme with our very large customers like IBM and Hewlett Packard and Dell has been globalization and getting into new and emerging marketplaces. The advice they’ve given me is, ‘Jim, you better be there with us because that’s where we see a lot of future growth for our business.’”

With that direct line of input, it was a fairly easy decision to take Emulex global by building strategic partnerships and even a physical presence in global markets where customers needed them.

But it’s not always that easy.

Test new opportunities

You’re not always lucky enough to have customers hand you opportunities. Even in those cases, you have to strategically decide what to pursue.

“It’s all about pooling pieces of sometimes diverging information and seeing trends that we can capitalize on,” McCluney says. “We’ve employed some portfolio management techniques with some fairly strict financial guidelines around them. Before we get too enamored with a given technology or market, [we ask]: ‘Can we make money? Can we grow? What are the competitive dynamics? Can we capitalize on what we have today, or is it something that would require major working capital investment?’”

Of course, many opportunities may pass that test, and you won’t have resources for all of them. Set priorities against other existing investments.

“You decide what the best investment is and best return for each of the markets and segments that you’re competing in,” McCluney says. “So you balance that portfolio against your overall objectives in terms of earnings and return to shareholders.”

You can predict some of that by researching markets, technologies and financials. But sometimes you have to see an opportunity play out to know whether the market will really adopt it.

If a trend passes those initial — somewhat subjective — tests, McCluney has a system for allotting more resources to winning ideas.

“We keep a pocket of funds to one side where it’s like seed money,” he says. “So for a while we’re seeding some things and maybe not spending a lot of money on it. If it starts to look really interesting, we’ll do a much further market, technology and financial analysis.”

When you start testing a new opportunity, put as much planning and goal-setting into it as you would a new business. The more targets you set ahead of time, the better you’ll be able to track progress and determine how many resources to add or subtract.

“Before we actually get into creating the new product, we write out a business plan, a marketing plan, a development plan that says, ‘Here’s what we expect to see and here are the outcomes we expect,’ so we have a scorecard for each of our programs, whether that’s in relation to revenue and profitability expectations, the profile of the product — the features, the cost — the timing of when we’ll get things done,” McCluney says. “We lay all that out to begin with. Then we usually have a very senior program manager on top of it whose job it is to monitor progress.

“We have a very straightforward red-yellow-green marker system for each of those attributes, and we monitor it as we move through the product life cycle.”

At first, new programs are tested with key customers, industry analysts and business partners who serve as marketplace guinea pigs under confidentiality agreements. But the key is having an internal leader devoted to each new project.

“You have to watch it doesn’t get subsumed or disappear into the day-to-day,” McCluney says. “Even in the best-run organizations, it’s so easy for new ideas to just disappear because people are so busy servicing customers, getting the quarterly results done and fighting the daily fires. So it’s very important to have leadership for the new idea and people championing it. Make sure you give it enough oxygen and enough money to thrive, even if it means taking something away from your day-to-day business to make those investments.”

But at the same time, don’t become so focused on the new line that it slips into a vacuum. Always keep your eyes turned out to watch for obstacles or more lucrative opportunities.

“We also have business development people who are out looking at the market and what’s happening outside to see if anything’s changed in our assumptions for that specific market,” McCluney says. “Has the growth changed? Are there other new technologies that could be disruptive to what we’re doing?”

All of those factors play into your decision of how many resources to feed the new opportunity — and when to cut it off entirely.

“When any of those [parameters] starts to get out of bounds, that’s when you really look closely at the project,” McCluney says. “And if too many things go out of bounds or if you see a competitor come out with something sooner, then that’s when you start saying, ‘Is it time to cancel this program, or could we repurpose the technology in some way that we’re not in direct competition?’

“If things change in the market, you may want to kill the program because it’s the best thing to get scarce talent onto some new things. What you always want to do is keep the hopper full of new ideas. We always have more ideas than we have money to put on them.”

Involve employees

There’s still something missing from this equation. You’re not going to find opportunities or make these decisions without help. And you’re certainly not going to get the necessary power behind new projects if you can’t rally your employees in support.

“Make them part of the process,” McCluney says. “If you run some kind of ivory-tower process and people don’t understand what’s going on, you’re opening yourself up for what I call passive resistance. People just don’t get behind it.”

Start by simply keeping employees informed. McCluney holds quarterly all-hands meetings at each site — either physically or through a webcast — as well as regular round-table discussions. That communication involves some translation.

“A lot of employees need a little bit of a decoder ring in what’s going on in the markets. They see all the press releases; they hear us talk about design wins,” McCluney says. “But it is tough when you live in technical jargon all the time. You have to try and remember, not only for employees but also for our shareholders: They may like the sound of it but they’re not always as technically literate as we are.

“You’ve always got to take it from the technical into, ‘Here’s what’s good for the company. Here’s what’s good for the market. Here’s why customers will buy this. Here’s the problems that we’re solving. Here’s how it’s going to translate into the performance of the company.’”

McCluney simplifies broadly, for example, by cutting acronyms out of his presentations. While he leaves it to the managers to further tailor each message, he remains on-call for assistance.

“Our line supervisor gets to see what’s happening and he or she knows their team best of all and how to translate what’s going on,” McCluney says. “And we say, ‘If you don’t understand it, call us and we’ll try and translate it for you.’”

Involving employees also means asking for their input. Meetings at Emulex include Q-and-A sessions, but with 768 employees, McCluney doesn’t have time to hear from everyone.

Knowing who to ask can be a selective process. McCluney relies on annual employee assessments that ascend all the way to the top, keeping his executive team attuned to the talent in the organization. Every employee has a chance to share their input in that meeting when they’re asked whether they understand the direction of the company and their role in that and whether they have suggestions for improvement.

More specifically, because those evaluations are geared at identifying future leaders, they also reveal where strengths and talents lie so you know who to ask about certain issues.

“We invite people into different meetings to hear what their opinions are and what they’ve got to contribute,” McCluney says. “Over time, you get to know where the talent is and where the skill sets are that you need to draw on for a given issue or a given opportunity.”

The point is to stay in touch with people, both internally and externally, to constantly gauge whether your direction makes sense. That has helped McCluney make the right decisions for Emulex, which reported $378.2 million in total net revenue and $231.8 million in gross profit for fiscal 2009.

“You’ve just got to keep asking questions,” he says. “Never assume the plan you set will be identical to what actually happens. There are always twists and turns in the road. … Always be looking out over the horizon, and if you’re lucky enough, you set your own directions there and set the path for the industry to follow.”

HOW TO REACH: Emulex Corp., (800) 368-5391 or www.emulex.com

Wednesday, 30 June 2010 20:00

Barry Arbuckle keeps MemorialCare lean

Barry Arbuckle wasn’t totally sold on the idea.

Sure, lean philosophies worked in Japanese manufacturing companies, but he wasn’t building cars. Could those waste-reducing principles really organize the five Southern California hospitals in MemorialCare Health System to operate more efficiently?

But Arbuckle, president and CEO, had to do something. Even before the recession struck, technological advances and labor shortages drove up his costs about 6 percent annually — triple the pace of government reimbursement. Medicare alone, which was already 20 percent below his costs, only creeps up six-tenths of a percent annually.

“It doesn’t take a genius to figure out how that math works,” he says. “You draw those lines out, and at some point, they cross where your expenses are rapidly outpacing any increase you can get in revenue. After that, it becomes a downward spiral.”

He tried obvious fixes like scrutinizing programs and laying off employees to save cash.

“You just can’t keep doing that,” he says. “There’s got to be a better way.”

So he started investigating how lean might make MemorialCare more organized and efficient by minimizing waste, errors and unnecessary costs and resources.

That journey required getting approximately 10,000 employees and 3,300 medical staff members on board to embrace a new way of thinking toward continuous improvement — in essence, fundamentally changing how the company operated.

“It’s not like a consulting engagement where they come in, you make some changes, you operate that way for a several months and then you slip back,” Arbuckle says. “We knew we couldn’t go down that path. Lean represents a fundamental change in the way you’ve always done things.”

Educate how change works

A trip to The Boeing Co. headquarters in Seattle opened Arbuckle’s eyes, while visits to lean hospitals sealed the deal. He realized this could actually work.

Seeing may not be believing, but it’s a good starting point to prove proposed change can be successful. In lean terminology, observation involves three actuals.

“Start by going to the actual place, talk with actual people and observe actual processes,” Arbuckle says. “Rather than talking about a situation and solving problems during a meeting, you start out by visiting the area where the work is being done, talking with them and observing key processes, and from there, identifying improvements to prioritize.”

First, expose senior leaders to the concept, then down the line with managers and other employees who will drive the change. Take them to companies that have been there, done that, asking why they went lean and how it worked for them.

You probably can’t transport every employee to other locations, so bring the evidence to them.

“Provide them little snippets of success stories from entities that had done this before — that, yes, it can be done,” says Arbuckle, who also invited lean veterans in to share their testimonies.

You don’t need everyone on board immediately. As long as you have enough people to begin rolling out the change, you can start small and let your own successes secure buy-in from the rest.

“Once you’ve set the stage and created a vision for how we can change, that’s all lovely, but at that point, this is all just words,” Arbuckle says. “But the proof will be in the pudding. Your first series of executions have to really show benefit, not only in improving the process but maybe also improving the workplace morale, employee satisfaction, things that people can really grab onto both tangibly and emotionally.”

You have to know where to start, so you have to identify low-hanging fruit to easily and successfully improve.

“Lean focuses heavily on eliminating waste, so look at processes that have multiple steps,” Arbuckle says. “(Look at) anything that has processing, which likely has the opportunity for redundancy. (Look at) any area that involves inventory, as you can have excess inventory or idle time while you wait for that inventory to get from point A to point B. Wait time — which can apply to clients waiting or staff waiting — that’s another area where you can focus.”

Basically, look for unnecessary, repetitive steps or breaks in the workflow.

Arbuckle started in a laboratory where the time between ordering lab tests and returning results averaged 88 minutes. After reorganizing the workflow through lean philosophies, he cut that to four minutes.

“I said, ‘Oh, for God’s sakes, that’s almost embarrassing,’” he says. “People thought they were doing all the right things, but it was just the processes that had been put in place for so many years. That was really what got things going: ‘Wow, you can make change. Yes, management’s serious about it. It makes life easier.’”

Investigate problems

While Arbuckle brought in lean experts to train lean “fellows” — who now educate others internally about lean formulas, measurements and steps — the solutions to streamlining don’t come from a secret handbook. They come from the employees who deal with the problem.

When someone requests a slim-down in their area, lean fellows interview the staff there to better understand their frustrations and the scope of their work.

“Rather than just talking hypothetically during a meeting and saying, ‘Oh, that should be easy to fix; just do a few of these things,’ we actually went there and talked to people who have done it for years,” Arbuckle says. “[We] talked to them about, ‘Why do you do it that way? What could we change that could make your life easier?’

“It was amazing to see some people say, ‘You’d be willing to do that? Because if you could just move my desk from here to there or the laboratory bench from there to here, that would shave off 15 steps every time I walk across this room, and I walk across this room 300 times a day.’ It’s like ‘Why haven’t you told somebody before?’ kind of answers.”

Arbuckle asks a set of questions to prioritize which areas to improve, including: customer benefit, impact on key performance indicators, probability of success, opportunity for increased capacity and potential to apply similar changes elsewhere.

In addition to gathering ideas from employees, look at the facts — which can often speak for themselves to reveal fixes. Collect data around the aspects of the job that made employees identify it as a problem in the first place.

“It’s inventory or steps to get from here to there, number of employees, or minutes — a lot of things are measured in minutes: turnaround times, wait times,” Arbuckle says. “Some of it needs to be reduced to or presented by charts and graphics because the numbers would baffle people.”

Then, all of those details are compiled and mapped out in a value stream analysis. It shows the process, from start to finish, including every step each employee takes along the way. For example, Arbuckle charted the complex workflow at the Long Beach Memorial emergency room before and after a lean revamp.

“Even if you know nothing about lean, you don’t understand how this cha

rt works, the first one looks like an electrical wiring diagram of a fighter jet and the second one looks like, ‘God, that’s easy; I could figure that out myself,’” Arbuckle says. “Once you see it visually, it’s like, ‘Wow, we don’t need these three steps, or did you notice we’re repeating the same thing four times?’”

Run with the solution

In lean, it’s more complicated than looking at data or asking what would make employees’ jobs easier. The more rigorous methods of the lean process include five-day solution-seeking workshops — condensed versions of continuous improvement — to completely redesign or at least drastically alter the process.

Most importantly, the workshops force diligence by immediately implementing change.

“You can do it right then and there,” Arbuckle says. “It’s not like, ‘Eh, we’re going to go off and we’re going to think about this for two weeks and then give you the answer.’ You’ve lost all your momentum.”

In addition to front-line employees, you can also invite feedback from customers, peers from similar companies and even colleagues from other parts of your company.

“You could bring someone from another department in; they just take a fresh perspective,” Arbuckle says. “It’s looking at things differently than you ever have — which sometimes just takes encouraging the people who have always worked there but also may take people from outside coming in. I’m not saying hiring consultants, for goodness’ sakes, but just bringing someone from the pharmacy into the laboratory. They might say, ‘Well, why is it that way? Maybe you could do it this way.’ It gets a dialogue going.”

And that’s the point. After all the facts and opinions are on the table, you must decide which proposed solution is best.

“There is more than one way to solve a problem,” Arbuckle says. “You can actually, using some data collection or a little pilot project, determine which of those two ideas works best — or maybe it’s a hybrid of the two.”

The other consideration in selecting both an area to tackle and a solution for it should be the required cost, time and effort versus the return. If one solution is better but much more difficult to achieve, Arbuckle takes the simpler route — usually as a doable step to the grander plan.

“Don’t delay the process to go for perfection if you can achieve some gains now,” he says. “There’s always going to be opportunity for improvement. If you keep waiting around or doing analysis endlessly trying to achieve perfection, you’ll never get too much done.”

The caveat at MemorialCare is that employees won’t lose their jobs if lean projects eliminate positions. Arbuckle finds other positions within the organization, even investing in training if none fit their skill sets.

“We’re not going to come in and use your ideas and then you or your colleague are out of the job,” he says. “You can imagine that doesn’t really cause people to want to be too participative.”

Communicate success

Now that Arbuckle has embraced lean — even deciding MemorialCare will use it for the long haul — he has to maintain momentum by keeping everyone aware of how it’s working.

“The communication, the publication of these things ... that’s what really keeps people going and thinking about how it might impact their work area,” he says.

Departments that have streamlined with lean can share in Friday report outs, where they stand before a group of peers, executives and sometimes even board members and they explain how things were before and why, what they did, and how it changed the process.

On an everyday basis, both employees and patients can see the changes on visibility boards throughout the workplace.

“Anybody can walk by and see storyboards [of] where we’ve been in certain areas, what was it like before, what’s it like after. There’s sometimes quotes and testimony from people in terms of what was done,” Arbuckle says. “That serves to remind people that this is going on and inspire them that if it’s not impacted their area, it can.

“If you have multiple sites that do some of the same stuff, once we see success in an area, that can easily and immediately translate to another hospital in the same area. It may be slightly different, but it’s a place to start.”

Additionally, several of Arbuckle’s 8- to 12-minute webcasts have covered lean events. He uses before and after footage, including visual charts and interviews with the people involved, to share their excitement around the change.

“That has been quite useful in getting people to stop and think about how might it apply in their workplace,” he says. “They see that the organization is committed to it. We’re willing to spend money that we believe can so fundamentally change the work in an area — either increase efficiency, reduce waste or improve the quality, improve engagement.”

The excitement has spread. Arbuckle has more requests for lean intervention than he has staff to handle them — though more than 100 leaders have been certified through MemorialCare’s Lean Leader Training program. After less than three years with a lean outlook, MemorialCare eliminated 342 unnecessary process steps, freed 3,177 square feet and reduced the distance staff travels to do their jobs by 936 miles. The company, which had 2009 revenue of more than $1.5 billion, anticipates savings of more than $17 million over three years.

Through lean philosophies, he continues improving operational efficiencies, employee satisfaction and the patient experience.

“It’s really an elimination of waste, and along the way, you’re improving quality because you’re eliminating waste and unnecessary steps. You’re eliminating the chance for errors to occur so you’re eliminating errors, making it more efficient,” Arbuckle says. “It’s really that whole theme that I think is driving the process and what causes it to resonate with people without regard to what industry they’re in.”

How to reach: MemorialCare Health System, (714) 377-2900 or www.memorialcare.org

You probably know John C. Bogle best as the founder of The Vanguard Group Inc. and creator of the first index mutual fund. Maybe you saw him named one of Fortune magazine’s four investment giants in 1999 or one of Time’s 100 most powerful and influential people in 2004.

But when you think of Bogle, you probably don’t picture a waiter.

Before starting the company in 1975 with 28 employees, 11 funds and $1.8 billion in net assets, Bogle spent his younger years serving tables. Today, when you ask the 80-year-old investment guru — who has served as the president of Bogle Financial Markets Research Center since stepping down as Vanguard’s chairman in 2000 — how leaders should act, he refers back to that experience.

“When you learn to wait on others, you’re learning important lessons about dealing with other human beings,” Bogle says. “You’re always going to act [kind and decent] to those above you, but you better act the exact same way to those who are under you in the pecking order.”

That stewardship carried into Bogle’s service-centered mission at Vanguard — which, as of 2009, has grown to 12,500 employees, 160 funds and $1.3 trillion in mutual fund assets — and continues to drive his leadership style today. While he acknowledges that guiding the course of an organization can be fun, he also recognizes it’s evanescent.

“You don’t run your company forever,” he says.

So he focuses on a kind of leadership that’s longer-lasting and more meaningful.

“I’ve been known to say, when I speak at business schools, that 100 percent of the leaders that come in and talk to these MBA classes say the first attribute of leadership is integrity,” Bogle says. “I agree with that, even as I point out that while 100 percent of the speakers at these things say that, less than 100 percent deliver it.

“I’m concerned about leadership in the wrong direction, leadership that is self-serving, leadership that has forgotten what fiduciary duty and stewardship are all about.”

Smart Business spoke to Bogle about three key traits good leaders exemplify.

1. Sense of purpose

Bogle begins his discussion of leadership by quoting Warren Bennis’ famous list of distinctions between managers — who have a short-range view and an eye on the bottom line — and leaders — who have a long-term perspective and an eye on the horizon. To Bogle, it all boils down to the single most important trait of leadership.

“Serving a sense of purpose, a sense of where we want to go and commitment to get there ethically — basically a strong moral compass — is an extremely important part of leadership,” he says.

Because you can’t lead without followers, the point is to inspire them with a common mission. So an important aspect of having a purpose is articulating it clearly.

“I don’t think we have nearly enough leaders who have an ability to take advantage of the power of words,” says Bogle, who takes communication into his own hands and looks to passionate writing, from Greek and Roman philosophers to the founding fathers to the Old Testament, for inspiration. “Writing a speech or a message to your associates is something that is extremely high on my priority list. It had to be my words, not written by the public relations department. It has to come directly from you.”

In Vanguard’s early days, for example, Bogle addressed his employees every time the company passed a billion-dollar milestone. Then it was every $10 billion, then every $100 billion. The point is that you get up in front of them and share where the company is and where it’s headed.

“You stand up and speak to them in your own words, a sort of state of the union address,” he says. “Write it in human terms; don’t make it too business-like. Write it. Prepare it. Let them know you’ve gone to the trouble of wanting to make sure they’re informed.

“I’m absolutely convinced people can spot a phony around a thousand yards away. So I guess I’d have to say that another attribute of leadership is, for God’s sake, be yourself.”

Q. What are the keys to communicating your purpose?

It’s to share your passion for the enterprise but also the mission of the enterprise. Here at Vanguard, my task is to create a company that was of the shareholder, for the shareholder and by the shareholder. You’d be amazed how many thousand ways there are to communicate that.

So it’s like, ‘Well, are you just going to repeat it again and again?’ I almost never repeat it in those words. You can express that commitment, service, stewardship in a thousand different ways. If you’re reading a little bit of history, you can also find quotations that are even better written than you can write them and use them effectively.

Communication, in many respects, must be repetitive. We all have short attention spans. But you can do it in so many ways and, in a certain respect, people don’t even know it’s being repetitive.

Q. How do you gauge whether employees are on board with your mission?

In a way, that’s a good question, and in a way, it’s a bad question. As I say in one of my recent books quoting Einstein, ‘There’s some things that count that can’t be counted, and there are some things that can be counted but don’t count.’ I think we can go off the deep end in trying to measure that kind of thing.

We do, of course, surveys of our shareholders. We participate in independent surveys. And we get the top scores there; that’s encouraging that our people are carrying out this mission. But it’s a confirming — it confirms your view of the facts [and] ... the reality of how people are reacting.

We do something we call Crew’s Views and ask our crew members, in an anonymous questionnaire, how they feel about their jobs, their futures, their careers, their opportunities, the management and the compensation. We do get a statistical feeling from that, but I still think personal feelings are the biggest important part of it.

How do you measure something like integrity? How do you measure something like commitment? I don’t know how you measure them. Does that mean they’re not important? No, not at all. They’re the most important attributes of all you do.

I hate this management consultants’ bromide: If you can measure it, you can manage it. What a horrible thought. Think of how our corporations are doing that: If you can measure their earnings, you can manage their earnings. I’m not happy with people trying to sell me something because they got a bunch of numbers — not that the numbers aren’t useful as a supplement. I want to be very clear on that. Particularly in the financial business, you can’t work without numbers. But numbers are the cart and not the horse.

Other than these formal surveys, [gauging commitment is] not an easy thing to do because you can really only do it anecdotally. So the only way you’re really going to get comfortable with how people feel is to talk to individuals.

I always hated the idea of employees so we call them crew members. We’re very nautical; you know, Vanguard was Nelson’s flagship in the Battle of the Nile, a great naval victory. You know, you can’t talk to 12,000 people. So you do it anecdotally. You do it regularly. You observe when you’re going over to the galley for lunch how people seem to be feeling. You

019;re standing next to people in line getting your sandwich; you chat with them — very unscientific. But at the end of it, I think you get a pretty good feeling of how things are going.

2. Humility

Bogle has built a mutual fund empire big enough to warrant an inflated ego. But he hates arrogance, especially in leaders.

“I don’t think you can build something without a large ego, to be honest with you,” he says. “You have to try and suppress it as best you can.”

Remember those followers you need in order to be a leader? They won’t follow blindly after a self-important CEO. They’ll be more committed to following you if you can bring yourself down to their level and adopt the idea of servant leadership, as Bogle does.

“Don’t think you’re a big shot,” he says. “That doesn’t get you anywhere. You’re just a normal, dedicated human being. I think those whom you serve will be much better, more loyal, more dedicated, more committed people in working with you.”

You can’t expect employees to buy in to your purpose if they don’t trust you. And you can’t expect them to trust you if you perch upon an ivory tower. So another key to being a good leader is being a humble one.

“The chief executive is an employee; let’s never forget that,” Bogle says. “A lot of times people think they’re the dictator of a corporation. I think if people would just realize that, they might have a little bit less ego wrapped up in all of this.”

Q. How do you suppress your ego?

What you do is, first, you mingle with those around you. You don’t sit in some isolated office high above the earth. You get out and be with your people. I’ve always thought the idea of an executive dining room was totally absurd and destructive to any idea of leadership.

You better make sure that if the executives get bonus compensation on the basis of how well the firm does, shouldn’t everybody? The worker should participate proportionately in the company’s success. I’m appalled when I see some of these companies where all the awards seem to go to the chief executive. Do you really do everything, no help at all? Please.

Q. How do you make everyone feel like part of the team?

It’s attitude. They will know whether you’re interested in them or not by who you are, maybe as little as a smile or a thank you or just a chat about last night’s Olympics, whatever it might be.

It’s not talking to the people around you, trying to go on a witch hunt — ‘What’s wrong around here and what’s wrong with your boss, what’s wrong with this, what’s wrong with that?’ It’s basically convincing them that you’re as deeply involved in the hard work of building an enterprise as they are. You’re not isolated in some ivory tower and nobody knows your name, nobody knows what you look like, nobody knows who you are.

We have a celebration for someone who’s been here 25 years. We have an Award for Excellence for individuals, about six a quarter each quarter, and I sit down and spend about an hour with each of those people, just trying to get acquainted. They then learn a little bit about the founder of the company, and I learn a little bit about them and the kind of people we’re hiring here.

3. Preparation

If leaders really are looking to the horizon, as Bennis said, it’s not for the scenic view. Good leaders keep their finger on the pulse of what’s going on around them as well as what’s coming around the bend so they can prepare their companies for the future.

Preparation, if you ask Bogle, combines awareness with foresight.

“The best leaders have to be looking around the corner all the time and not looking straight down the street,” he says. “Think about what’s around the corner often in terms of challenges and opportunities.”

Because what’s even worse than never getting a break in life?

“It’s a lot sadder when we get our breaks and haven’t readied ourselves to make the most of them,” Bogle says. “You have to be ready when opportunity knocks.”

Q. How do you stay prepared for the future?

First, you have to educate yourself every single day. One of the jobs of a leader is to learn, even as another job of the leader is to teach. Learning means not only staying up to date on what’s going on in the nation and around the globe — you can’t ignore current events — you also can’t ignore history. I just finished reading one of the great biographies of Alexander Hamilton by Ron Chernow, the struggles he went through to try and get America going down the right course.

So reading — but not just reading business stuff, which all of us do — but reading history and, where possible, even reading the classics. It’s amazing to me how much we can learn if you read Seneca, Fontaine, Socrates, Sophocles, Benjamin Franklin, Alexander Hamilton, John Locke: all the great thinkers of the Enlightenment. It’s an extremely important part of educating yourself.

So staying in touch with the classics, learning from history — that’s readiness, I think. You can never be totally ready. No one knows everything. But you do your best to make your mind a little bit bigger and a little bit better every single day.

Q. How does history prepare you for the future?

There’s this wonderful saying that says those that do not learn the lessons of history are condemned to repeat it. For example, for a nation, we look at the history of the Roman Empire and it finally collapsed. We should look at that and say, ‘Is that in store for the U.S.?’ Or in a much, much smaller way: ‘Is that in store for our company?’

To look at leadership as an isolated thing where you know more about your little, infinitely tiny, small company than anyone in the world — I’d rather know a little bit less about the detail and a little bit more about what’s gone before.

How to reach: The Vanguard Group Inc., (877) 662-7447 or www.vanguard.com

As a financial adviser, Bob Johnson learned that caring for clients could make the difference between keeping or losing them. Now, as managing director of Merrill Lynch Wealth Management, he sees how the same thing works for employees.

“You have to treat your employees just like your clients. You can’t take them for granted,” says Johnson, who manages 179 employees and $14 billion in assets at Houston’s downtown complex. “There’s a lot of movement within our industry. It’s my goal to minimize that, and the way to do that is to be responsive to employees.”

Even the way you organize meetings can make employees feel valued. Telling them what to expect shows you respect their time.

“It’s all the little things that matter,” Johnson says. “When you tell them how long it’s going to be, who are going to be the speakers, what the topics are and when you’re going to be out, that shows them that you’re thinking about them and not yourself.”

To set the pace of those meetings, Johnson follows the advice of an old boss who told him to start each meeting with recognition.

“What separates average leaders from great leaders is promoting that and publishing it, shining the light on others,” he says. “So much recognition that people want has nothing to do with financial incentives.”

You also may want open communication in the meeting, but you actually have to initiate it, because some people will be intimidated.

“You have to take the lead,” Johnson says. “I think it’s my responsibility, not theirs.”

To get employees accustomed to opening up in meetings, Johnson gathers small groups of four to eight employees in his conference room. He invites a variety, from the highest-producing financial advisers to the newest employees, and makes sure some outspoken ones are in the mix. He introduces the issue and relies on willing ones to get the ball rolling.

“When you’re in a smaller group, that tends to foster people’s willingness to communicate. Once they see one or two people [talk] and that it was OK, then the others feel more comfortable,” Johnson says. “It doesn’t happen overnight, but after four to six months of consistently doing it, they see that you really do care about their opinions.

“You have to make it about other people. You’re in the wrong profession if you make it about yourself. It’s a job requirement, kind of like you need to have good eyesight to be a pilot. You need to be tall to be a center in the NBA. You need to care about other people more than yourself to be a competent leader.”

How to reach: Merrill Lynch Wealth Management, (713) 658-1200 or http://www.ml.com/

Merrill Lynch & Co. Inc. is wholly owned by Bank of America Corp.

Barron’s named more financial advisers from Merrill Lynch to its 2010 list of 1,000 Top Advisors than any other firm — 317 to be exact. Merrill Lynch also had the most No. 1 advisers in each state. Six advisers from Bob Johnson’s complex made the list.

Friday, 26 March 2010 20:00

Buck Consultants connects people

Harry Reinhart has 90 years of legacy to rely on. But that doesn’t mean Buck Consultants LLC is still the same company — at least not in Pittsburgh, where Reinhart serves as market leader for the human resource and employee benefits consulting firm.

To keep his approach current, he needs employees who can connect with clients — which also requires connecting with each other.

“You have to give them an environment that allows them to deliver those solutions,” says Reinhart, who supports his 90 employees by reducing administrative burdens and providing a network of teammates to rely on.

Smart Business spoke with Reinhart about building a team environment.

Q. How do you determine whether an employee will fit in at Buck?

You want to try to find people that exhibit the traits that would tell you that they can contribute and also get satisfaction from working in a group, not just alone.

This is pretty simple — people that have been exposed to sports at some time in their life is usually a good indication. You look at people that are educated [where] they work a lot in teams, so you start to understand some of the universities that they’ve gone to.

And you ask that question: ‘Tell me how you work in a group.’ It can be as simple as that.

Q. How do you create an environment conducive to teamwork?

We have a very strong peer review system in place. When they do some work for a client, nothing goes out the door without someone more senior reviewing it, including even e-mails as well as day-to-day conversation. Anything that goes to a client is reviewed through a team.

A lot of the goals and values that we set down for individuals involve actually keeping track of how often they’ve conducted team meetings. So if someone says, ‘I had a great year this year, and I did all of this work for a client,’ you say, ‘OK, but you didn’t peer review any of your work.’ Then you know you didn’t have a great year.

Q. How do you balance individual goals with team goals?

We get a budget from corporate that says, ‘Here’s what we need from you this year.’ And we all get together and say that Harry doesn’t own this goal; this office owns this goal. We figure out who’s going to have what piece of it, so even at that level it’s a team goal.

Basically, it trickles down and we say, ‘Here’s our goal for the year. Here’s your piece of it. You’re going to be rewarded individually on that piece, but you’re also rewarded on the office performance.’ So a component of their personal rewards is based on how well the office does as well as the unit and the company itself.

You can have someone that did everything on their own and maybe met their individual goal, but the office missed their goal or the unit missed their goal and they won’t be rewarded for that component of it. So everyone has a vested interest in helping the office, the unit and, ultimately, the company to be successful. To summarize that, I would say that your reward systems have to be aligned with the behaviors that you want.

Q. How do you build trust within teams?

I think a lot of that has to do with how you react when there’s a mistake. When there is a mistake, the best employees say, ‘I made a mistake here. How do I fix it?’ The worst ones say, ‘It was someone else’s fault.’

You create an environment where errors are OK because I think if you don’t have errors, you’re not pushing the envelope enough. I don’t want that to say that we have errors here; the peer review process catches that before it goes out. But people learn incredibly faster when there’s an error.

If you have the right people, the trust is built because the person who’s leading the team says, ‘It’s ultimately my fault,’ and there’s not an environment that says, ‘Hey, you made a mistake. You’re fired.’ We take it together.

One of the things you want to look for is a lot of my leaders and people that are in more supervisory positions get great pleasure out of having the people that work for them succeed. The ones that say, ‘Hey, look what I, I, I did,’ if they say ‘I’ a lot, it’s not a good thing.

Q. If employees aren’t meeting goals, how can you bring them back on track?

We don’t shoo them out the door — not at first. We’ll sit down with them and say, ‘Look, you’re not doing the types of things that we need you to do to help us as an office to be successful.’

One other thing that I think is critical is that I insist on a balance. People that put in 80- and 90-hour workweeks aren’t going to be good to me for the long haul. I want people to have a life outside of work. We’re pretty flexible around those kinds of things; if you need time, we find a way. We have many modified work schedules here.

I handle that one. I’ll go in and say, ‘That’s enough. If you’re doing this, it’s because you’re not communicating or you’re not delegating properly. You either need more help or you need different team members or something’s not right here.’ I’ve watched it happen too many times where they literally get burnt out.

It goes back to [the idea] that our business is people. It’s not bricks or mortar. The clients hire people so we need to find the right people.

How to reach: Buck Consultants LLC, (412) 281-2506 or www.buckconsultants.com

Friday, 26 March 2010 20:00

Long-term outlook

Loren B. Shook loves telling stories. One of his favorites is the one about Rose.

When she was transferred from a hospital to Silverado Senior Living Inc. — where Shook serves as chairman, president and CEO — 100-year-old Rose Arrington had been diagnosed with Alzheimer’s disease and pneumonia. She couldn’t walk, feed herself or speak coherent sentences. People figured she didn’t have long, so it was just a matter of making her final days comfortable.

But within six weeks at her new home, Rose wasn’t just walking, talking and feeding herself. When the residents held a competition at the park, Rose won the medal for throwing the ball the farthest.

Shook doesn’t just share the tale because it’s touching but because it encapsulates what the company he co-founded in 1996 is all about. In other words, he talks about Rose to illustrate his vision and culture.

“The storytelling culture helps keep the culture in place and keep it alive and renews it every time you tell a story,” says Shook, who gathers tales from Silverado’s 20 care communities and several other home and hospice offices across four states. “You can celebrate successes with those stories.”

Silverado’s vision is to give life to memory-impaired seniors, their families and others in the company. With a goal that big, he needs everybody to be totally committed to the vision — which means being totally committed to the culture that will help all of them achieve it.

“It starts with the vision of the company and the clarity of what that vision is [and] clearly communicating that,” Shook says.

That culture is obviously important when it results in success, like thousands of Alzheimer’s patients who regain motor skills and reduce medications. But it also benefits his 2,042 employees and the business he runs.

“You get to have the choice of making a positive difference in your co-workers’ lives as a supervisor or the employer,” says Shook, whose company has made multiple best places to work lists. “It also can be — and is — directly in alignment with making a better business for you to run and a more profitable business and a more secure one.”

Here’s how Shook sustains the culture that carried Silverado to 2009 revenue of $108.7 million and keeps improving life for thousands of patients and employees.

Articulate your culture

Potential employees who interview at Silverado will certainly hear about Rose or Edith or Floyd or any other thousands of success stories Shook shares. The test is whether that matters to them.

You want employees who naturally sync with your culture, but first you have to know what you’re looking for. In other words, be able to clearly articulate and illustrate your culture in order to bring in like minds.

It starts with explaining your purpose to ignite passion for where you’re going before you get into the details of how you’ll get there.

“One of the big [mistakes] is to not clearly communicate a compelling vision as to what the company is about,” Shook says. “You’ve got to have that foundation — what your company’s about and what you’re doing. Without that, you can’t build a culture.”

To make your vision compelling, explain not only what you do but why it matters.

“No matter what you’re doing, what you’re doing is important. Any business has a meaningful place to play or nobody would be buying it as a product or service,” Shook says. “You’re making not only just some old shoes; you’re making shoes that have the benefit of this or that. You can look at whatever you’re doing as just turning out a humdrum commodity or you can look deeper at what it is your product or service does for people — and there is meaning.”

Shook, always the storyteller, gives the example of several men laying bricks to build a church. The first one, when asked what he’s doing, says he’s just stacking this brick on top of that one. The second one says he’s creating a building and getting paid $30 an hour. The third one says he’s building a church where people will get married and find peace.

The way candidates respond to your purpose or even a question like, “Why do you want to work here?” can cue you into how broad of a vision they have for themselves, whether it’s just laying bricks or being part of something bigger.

Continue gauging their responses as you zoom into the details of the culture you rely on to achieve your purpose.

“It extends off of the vision of the company and the purpose and the reason the company exists,” he says. “Then you roll that down to the operating philosophies. … Let people know what it looks like.”

To do that, explain the principles that guide your company. For example, Silverado values the get-give philosophy, which means employees should get more out of the job than they put into it, and likewise, the company should get more from the employees than they give them. You can train them more later on how to practice those principles, but for now, just give them an outline of what to expect.

Part of your explanation is also sharing success stories — whether it’s Rose’s winning pitch, products you launched, clients you landed or sales records you broke. Show them proof that the company is actually achieving what it aspires to and that they can be part of that success.

“Let them know that the company does make a difference, the people who’ve come before them have done that,” Shook says. “So it’s not just a dream; it’s reality.”

Their responses will indicate how well they’ll fit the company.

“Going through those stories with a prospective staff member, you see: Does that matter to them? Do they care about that?” Shook says. “The right person will be blown away at what a wonderful change in Rose’s life that is, and the wrong person will say, ‘So what?’ You don’t even have to hear them; you can see in their eyes whether that’s significant.”

Whether they come out and say it or not, you can sense excitement and passion in their reaction. And, of course, you can just ask if they want to be a contributor to that result.

“It’s all about the view that the employer paints for the employees in producing that and what they feel about it,” he says.

Hold everyone accountable

Shook is quick to admit nobody — including himself — is perfect. But the responsibility of maintaining a culture means keeping yourself and others accountable to it.

“Part of building a culture that’s sustainable and works is you want to make sure that the people from the very top on down are walking their talk,” he says.

Accountability starts with clearly laying out your expectations. The key is to make it digestible by giving employees pieces they can practice anywhere.

“You boil it down into very small parts that are understandable,” Shook says. “Show them the significance of what it means for them: how it solves their real-world problems that they face every day doing whatever job it is that they do.

“You up the ante any time you can say, ‘This is a technique you can use at home to make your life bet ter.’ Extend it beyond just the workplace and provide a ‘what’s in it for me’ kind of thing.”

Of the skills that are crucial across positions and industries, perhaps the easiest place to start is communication. Explain skills that employees will need at the company, providing examples of specific situations they might encounter.

Shook offers sample customer satisfaction issues. A resident’s family members visit and get upset that their mother’s socks aren’t organized the right way. They’re not mad at you, and maybe they’re not even mad about the socks. The point is to teach employees to find out what the issue is and be conscious of their response to it.

“When somebody’s angry or accusing you of something, recognize your own place. Human nature is to protect yourself, to deny,” Shook tells them. “Do the opposite of that: Repeat back to them what you heard them say and make sure that you are hearing them clearly. If they are angry, acknowledge that they’re angry and [say,] ‘I want to know what it is you’re upset about so that I can address that.’”

Only after you’ve provided tools and expectations for upholding your culture can you monitor employees.

Shook’s observation starts with an overall look at the department or location, which includes satisfaction surveys and understanding personnel data. In culturally strong areas, staff satisfaction and retention will be high. But a lot of turnover, low survey response rates and workers’ comp injuries or other liabilities should send red flags.

To pinpoint where the problem is, start at the top.

“First, make sure that the leaders are living that culture and modeling it for their associates,” Shook says. “Because if they’re not, then it’s really difficult to expect the people below them to be doing it.”

Shook and one of his senior vice presidents hold staff meetings at each location — minus the supervisors. He asks employees for their needs and wants as well as the company’s strengths and weaknesses. Then he’ll dig into specifics about the leaders, asking for three things they do well and three things they could improve.

You raise the level of employees’ openness by not including leaders in the meeting and by assuring them you won’t disclose who said what.

While their answers will help you evaluate how leaders model the culture, it’s not all about what they say. Pay attention to how quickly they answer and which list of three comes more easily.

“When I ask about a leader where the culture’s not right, I have silence in the room,” he says. “People have a difficult time coming up with anything good. Sometimes they’ll come up with one thing but they can’t come up with three good things, so I see them struggling.”

If the leader seems to be doing everything right, then you can rely on him or her to help evaluate employees.

“You start with [asking,] ‘Are they living the culture?’” Shook says. “And then, ‘Give me examples of how they’re doing that.’”

If you get a lot of complaints around certain people from peers, superiors and customers, their reaction can say a lot. Do they place the blame on colleagues or talk openly about the issue?

Investigate why they’re out of sync with your culture. If they previously modeled it and suddenly slipped off track, maybe there’s another change in their life affecting them, like a death or divorce. Offer to adjust their schedules or set them up with a counselor.

Maybe they were never on track to begin with. Those are the employees who don’t want to fix the issue. Even if they say they do, the real answer is whether their behavior changes or not.

“My responsibility is to give them a work environment where they can succeed, give them leaders to work under where they can succeed and give them the resources needed,” Shook says. “But it’s up to them to take and use those resources and to improve. They have to be responsible to make themselves successful.”

Those who won’t don’t belong. But the process of helping willing employees improve can also help you keep yourself accountable. Each coaching moment is a chance for you to evaluate yourself on the issue so you can give them an opportunity to learn from your experience.

“I go through my own dilemmas I’ve had and the growth I’ve had as a leader throughout the years and let them know that the feelings they’re having are the same everyone else has,” says Shook, whose sharing gives employees paths to improve how they model the culture, therefore improving the company.

“What’d you learn from your failure that you’re going to do differently next time? What’s your responsibility in that failure, and how can you improve yourself?” he asks. “When failures happen, it’s not that you failed that matters; it’s what are you going to do about it that matters.”

How to reach: Silverado Senior Living, (949) 240-7200 or www.silveradosenior.com

Thursday, 25 February 2010 19:00

Readying for health care reform

Daniel Touizer doesn’t know what his company will be dealing with next year. But that doesn’t mean he’s not ready for it.

“We’re always researching the industry for ideas to bring in-house and coming up with new strategies that’ll make our company stronger and more profitable,” says Touizer, the chairman and CEO of Cinergy Health Inc.

Leaders have always had to prepare for uncertainty, but it seems like change is now the norm — especially for Touizer, who is staying tuned to the health care reform discussion that could change the health insurance industry.

Smart Business spoke to Touizer about preparing for changes you can’t control.

Q. What advice would you give leaders for staying on top of external changes?

Listen, there’s a lot of regulation coming down in many industries. Stay abreast of what those regulations are to make sure they wouldn’t impact where you’re headed in business.

You just need to make sure that your business is always preparing for certain changes … that you can’t stop. But you have to keep your company alive so you have to plan ahead and make sure you have other strategies so that you can weather any of those storms and still have a viable business model.

Always look for other opportunities because you never know where you can uncover an opportunity that never existed a day ago. You have to stay in tune and keep your eyes open because that opportunity can be the one that can really turn things around for you.

As a leader, I’m really thinking one year, two years ahead and taking steps now that will ensure that — even if health care reform does move my business in a different direction — that we can survive and prosper for many years.

[Leaders need to] be ready with other strategies so they can keep their customers, their employees and their shareholders happy. That’s what a leader needs do: Always be accountable for the future of the business. Always be the leader and the visionary, because no one else will do it unless you do. So leaders need to be on top of their game and be ready to make changes and just plan ahead.

Q. How are you preparing Cinergy for what may come?

In my industry, you really can’t tell what’s going to finally happen. You still have the public option, which is looming, and no one knows if it’s going to be in the bill, if it’s not going to be in the bill. And if it is in the bill, does it end up crushing health insurance companies because of the way that public plan will operate?

So if that’s the case, then as a national insurance agency, we look into now creating different products in the insurance industry that are not health-related, such as life insurance, dental insurance, property and casualty insurance — other lines of insurance that we can market the same way using the same marketing principles.

If health care were affected in a very bad way businesswise, we would survive because we would be involved in other distribution platforms. And if health care reform doesn’t affect the health care industry, we will just have grown our business and done things to enhance revenue and profits. Either way, it’s a win-win. It’s offensive and defensive, and that’s always a good approach.

Q. How do you keep customers and employees reassured during change?

With customers, we just let them know that we’re always going to do as best we can given the framework that we have to work with; that no matter what, there’s going to be someone on the other end of the phone to help them. There’s some external things — like health care reform, let’s say — that even consumers understand companies have no control of. But we field the call. We take the time to speak to our customers, to educate them if they hear things that they’re frightened about. We’ll take the time to give them the facts so they’re not as panicked.

There’s always things you can’t control. But you can control what you do inside your company. We’re controlling the customers to service them the right way so that we keep them. We’re controlling how we compensate our people to stay competitive so that we can retain them when the market’s getting very competitive. We try to control the environment where they work so they’re happy and they have no reason to go anywhere.

You need to communicate — very important. I’ll pull [employees] into my office and say, ‘Hey listen, we’re going through such-and-such situation, and I want you to know that I really value your input. This is what companies are all about: sticking together and getting through anything.’ So when they feel that bond, it goes a long way.

I’ll even sometimes give a little extra financial compensation at a time like that because that really seals it where they feel that not only are they feeling that bond, but their work is even valued more.

A little goes a long way in times of big change because it makes people feel that they’re part of the change or they’re being valued for the extra effort they’re putting in in a time of change. That makes people feel part of a team. They can weather the storm better when they feel included and reinforced by leaders that, hey, we’re all family, we’ll get through anything together.

That’s usually a good way to make them feel comfortable even through rocky times, as opposed to being hush-hush and having people with question marks in their mind. That usually breeds uncertainty in people and it’ll always affect the way they work.

How to reach: Cinergy Health Inc., (800) 847-1148 or www.cinergyhealth.com

Want more? Get more in-depth with Daniel Touizer as he discusses how he adapts Cinergy Health for changing times.

Tuesday, 23 February 2010 19:00

On the offensive

Whether the ball is in his court or not, you can be sure that Michael Rich is playing offense. For proof, just look at what he’s doing with Equitrac Corp. in the midst of a recession.

The president and CEO led the company to record product sales and $60 million in revenue for fiscal 2008 by expanding into the education market. Now, you’ll find Equitrac’s print management solutions in 50 of the top 100 universities, in addition to the offices of about 20,000 customers in 40 other countries.

“We could have said, ‘Let’s brace for the worst recession ever,’ and the next thing you do is you start retrenching, limiting your plans, cutting costs, firing people,” says Rich, who manages 300 employees. “If you believe in your vision, you’ve got a great team and you’re executing in the market, you don’t go into a highly defensive posture. You’ve got to stay on offense and work through those challenges.”

Smart Business spoke with Rich about weighing opportunities to grow during a recession.

Maintain marketplace awareness. Customers and partners are the best resource to help guide your direction and strategy. So we spend a lot of time in the field engaging our customers and partners. Over the past year, I have been in the field almost on a weekly basis meeting with C-level executives of our end customers as well as our channel partners.

It’s very easy when you engage your customers and partners to want to deliver some presentation to them and do most of the talking. We are disciplined in making sure that we’re doing more listening than talking, and as a result, we get a lot of excellent input. We have to stay on top of (their requirements), and the best way to do that is by direct interactions.

We have to span a number of different conversations with our business partners, not only in terms of what the end customer wants but what we need to do as an organization to support the business relationship. With end customers, you look at their specific feature requirements. You look specifically at their workflow needs in their firms and how to tailor your applications to provide a compelling value proposition. You need to ensure that you’re solving real pain points for the customer.

You need to amalgamate that customer feedback into a set of market requirements. Customers and partners will ask us for enhancement requests for the product. We try to assess how many of our customers are asking for similar things, and then we can make a priority call in terms of what to actually include in the end product.

We will author a document, which lays out the feature requests. Before you actually commit to any specific development agendas, we like to have our partners and customers review those expressions of their requirements to ensure that we have them right.

So the first part is getting the feedback. The second is synthesizing it. And then thirdly is reviewing that information with the customer to make sure that we’ve heard them correctly.

Weigh requests against plans. You can be completely facing gridlock responding to every single opportunity that comes up. We’ve got a game plan that we execute, and that’s how we stay on track. We know what exactly we’d like to accomplish for the year. We’ve got a level of financial discipline to make sure that we pursue opportunities that can deliver profitable growth to the company, not just pursuing revenue for revenue’s sake. In other words, don’t respond to any opportunity just to get another couple of bucks of revenue in the business.

Make sure that you’re looking at every opportunity through a strategic lens. You’ve got to look specifically at: What are you trying to accomplish in the marketplace? How do we define success? What kind of growth targets are we looking at, and how does the market support those?

You need to ensure that you don’t let opportunistic revenue scenarios take you too far afield from your core strategy — not to say that you don’t look at and seize opportunity when it presents itself, but it’s got to be in the context of not only your strategy but your core competency as a company.

When we start a new opportunity, we look at the market size, the product fit. We evaluate our go-to-market strategy — in other words, how are we going to deliver the product to market, how is it going to be serviced and supported, what kind of investments are going to be required to evolve the product over time?

Some days you say to yourself, ‘Why are we not running after that revenue opportunity?’ You can always sell a couple of products to a couple of customers — a market that does not make. So we’re looking at the broader market opportunities. When you’re looking at scaling your business, you can’t have a lot of one-off solutions for a single customer. You’ve got to build your products with an eye toward the market so you can continue to grow and scale your business.

Research decisions. We don’t have infinite resources here. We’re always evaluating where to put the next incremental or marginal resource. While you might have a broad market opportunity, the momentum in those markets can help guide your resource allocation decisions.

The momentum of our business is typically defined by our sales results. So if we see particular strengths in one geography versus another, we’re more confident in investing in those. If we see a specific market that’s growing faster than another, it becomes somewhat of an easier decision to invest in those growth opportunities that have shown and proven that the value proposition is working.

Our greatest challenge is where to make those investments first and how to prioritize them. Sales results tend to be an excellent guide for that. You don’t double or triple down on a particular strategy until you see some results.

We have the operational systems in place that we can track revenue against those product categories. We have daily reviews of our sales results. ... So if something is not achieving its targets, we know it very quickly.

How to reach: Equitrac Corp., (800) 327-0183 or www.equitrac.com