Michael S. Dell is no longer the rock ‘n’ roll kid who became the youngest CEO ever on the Fortune 500, but he’s still hip to keeping up with the kids.
Dell, who founded Dell Inc. in 1984 with $1,000 and an idea to build relationships directly with computer buyers, today oversees a company with more competition in pricing, product and service than ever before.
More than 26 years into his gig as chairman and CEO, though, Dell, whose company did $52.9 billion in fiscal 2010 net revenue, still talks like that fresh-from-college kid about innovation in products and customer service. He talked about these points to a standing room only crowd at the Cleveland InterContinental Hotel’s Bank of America Conference Center in May. Speaking as part of the Cleveland Clinic’s Ideas for Tomorrow series, Dell spent nearly an hour talking about what makes his company tick.
The conversation started with thoughts on health care — including a moment of glee from the Cleveland Clinic folks that Dell Inc.’s properties are entirely smoke-free — and transitioned into how Dell keeps an edge on innovation. His first rule to keeping an edge: failing.
“When you get a business that changes very quickly, you get some of that naturally,” he says. “You just have to change. To be successful, what you have to do is have an acceptance of risk and you have to be pretty explicit about that, because if you don’t accept risk, you don’t get any innovation. And that means part of risk is you have to accept failure because not everything works.”
And when it doesn’t work, Dell gave some advice that should help soothe leaders coming off the rough landscape of the last few years: Failure can be your best lesson for your next big success. He pointed to a tripping point for Dell Inc. in the ’80s when there was a great flux in the price of pieces related to computer memory. The company’s system of holding onto a lot of inventory put it into an unfortunate bubble.
“It created a huge bubble for us at the time, and what we learned from that is you have to be really world class at managing inventory,” he says. “We went from being bad at that to being a lot better at that. Today, we typically have about eight days of inventory; the average manufacturer tends to have 40 to 50. We’re arguably one of the best in the world at managing inventory. And that became a huge competitive advantage that led to all kinds of growth for us. When things are going well, it’s hard to learn because you’re just growing, so you have to make mistakes. One of my guys says I’d rather try to do 10 things and get seven right than try to do five and get five right.”
Mistakes today are even more manageable, as Dell noted that the opportunity to discuss those problems with your customers through social media changes the landscape. Dell.com has more than 500 million users per year, and the company also is active in social media ranging from Twitter to YouTube. In all, Dell estimates that his company has 2 billion conversations per year with customers. His reasoning for the chunk of that coming from social media is simple business.
“The first thing you have to realize is the conversations are going to happen whether you are there or not, so you might as well pile in and get engaged in conversations and begin to understand,” he says. “What we found, for example, in social media, is it has reduced our time to understand new trends and problems.”
Dell followed this up with an example of a computer display released in Australia that showed a glitch on certain test programs. The immediate conversation about that on social media rushed up the company’s chain.
“We were able to solve that problem in about a week or two because we were paying attention to the different things out there, whereas previously, those things might stay out there for quite a long time and not get addressed,” Dell says.
Asked to expand upon points made during his conversation, Dell kept it simple and consistent: “Be willing to take risks and change,” he said.
“Imagine what something could be in five years and start putting the pieces together today.” •
HOW TO REACH: Dell Inc., www.dell.com
Richard Glikes sees the change coming, and he’s telling everyone he can about it.
As the executive director of Home Theater Specialists of America, he knows that people have changed the way they think about home entertainment drastically in just the last few years — and the more technology improves, the more they’ll expect.
So at HTSA, the 60-member cooperative of home theater and systems integration specialists, Glikes is constantly pushing the group to be ready for tomorrow.
“The business model is changing rapidly,” says Glikes of the group, which did $450 million in sales last year. “Our members who are retail stores are going to end up being like general contractors, they’re going to be like technology specialists … and there’s going to be a lot of new technology that we’ll have to understand and communicate to them.”
Smart Business spoke with Glikes about how he keeps his priorities straight while keeping up with those changes and about what Bob Dylan taught him about training.
Stay on track. I had a directing project in graduate school at Villanova, and I had a scene that had about 15 people and I called a rehearsal and I’d gone to all my friends and said, ‘Do you want to be in the play?’ And they all said, ‘Sure’ and about five people showed up. I called it again and eight people came. So what I did was I cut out the scene. Basically what that taught me to be was flexible — you have to be able to adjust on the fly, and you can’t be rigid.
You have to be able to adjust to the situation and be intelligent about it, and a lot of people get overwhelmed. If you have 10 different things you have to get accomplished, my way of business is you attack them one at a time. Other people get overwhelmed because, ‘Oh, I have 10 things I have to do; I can’t get them done.’ That’s because they’re trying to deal with 10 things at once. I will sort them out and deal with them one thing at a time. The same with personal problems: People have three or four personal problems, they get overwhelmed, they get stressed out. Deal with them one at a time.
I try to prioritize; I make lists every day. I have a yellow pad that’s on my desk and I try to prioritize who I’m going to call, and then I check them off as I call them, and I work through a list on a daily basis. You also have to prioritize where you’ll get the most action. I’m fortunate I have some very good assistants that I can delegate specific responsibilities to, and they do a very good job.
If you write it down and refer back to it, you get it done. If you just leave it to your imagination, you’ll get distracted. It’s much easier for me to have it down on paper, in front of me, and I know I’ll get through it. I don’t believe in calling people back the next day; I believe in calling them back the same day.
Treat people right. I think doubt, questioning and insecurity are very bad for a business environment. You treat people like adults, you give them specific responsibilities, and you compliment them. Most businesspeople don’t tell people they do a good job enough. I like them to know they’re appreciated. I also really believe in teamwork, so I try to let everyone know everything that’s going on with what’s going forward at least six months out. I try to keep them involved in the process, then there’s buy-in, then there’s not as many questions. We’ll review what’s coming up short-term, midterm, so that everyone knows what everyone on the team is working on. If you treat people like adults, you give them responsibility, and you mark their papers and they do well, you let them know so, and if they don’t, you tell them.
My people pretty much come and go as they please. I’m very flexible with that. They don’t have to be here at 8:30, they can be here at 10 so long as they get it done, and they get it done because they appreciate the fact that it’s not rigid. One of my favorite sayings is smart people can solve problems, and if you hire for intelligence and you give people flexibility to be themselves, you get good results.
Spend the resources on training. What did Bob Dylan say? ‘He not busy being born is busy dying,’ and if you don’t move forward, then you’re absolutely going backward. We’re in a fast business to begin with, and we are the leaders, really, in our category, and as a result of that, we need to be upfront with the latest technology. The bad news is that the vendors have basically abandoned training because it’s expensive. But the companies that still believe in it long term will have more success. We believe in it, we have a full-time sales trainer, so we’ve taken over the burden from the vendors.
(He) visits with them, and then we try to make it as advantageous as possible. Green is very big right now, and we’re trying to have a lot of green options available, so take solar. We’ve just sent 10 people to school last month, and we’re sending another 13 or 14 this month, and so they’ll be able to sell solar panels to save on electricity, and so what we’ll do is we’ll have twentysome people trained, and then we’ll bring that up again, and if they have success, then it will filter through the organizations.
When you have 60 different companies you want to have a unified message, you want to have a unified purchasing, you want to be all in step. I can’t travel as much as it would take to get to 60 stores or 60 dealers and 97 locations and so he does a very good job of that. And it’s done a very nice job of coalescing the members into the unity that we’re looking for.
How to reach: Home Theater Specialists of America, (610) 363-9055 or www.htsa.com
Adelbert “Chip” Marous remembers the feeling of having to succeed or fall flat on his face.
It was 1980 and Marous and his brother, Scott, had just founded their own company, and the two young carpenters were the only employees.
That experience taught Marous how to be aggressive and adjust on the fly. And adjust he did. Today, Marous Brothers Construction employs up to nearly 600 people during peak seasons and has grown into a contracting powerhouse.
But Marous, the company’s president, hasn’t forgotten the lessons he learned while figuring things out for himself, so he grows the company through similarly strong-willed talent. That brings in a lot of aggressive mindsets, but that also drives growth.
“We have more type-A personalities in this company than probably any other company in the United States,” Marous says. “But that’s why we’re aggressive. That’s why we’re high energy here.”
Smart Business talked with Marous about how you reward hard work with opportunities and why you throw young talent into the frying pan.
Make sure you reward hard work with opportunities. In this business, and in life, it’s called respect. You have to respect your people. We respect our people; we give them opportunities. We understand it’s a two-way street: You work hard, we work hard and good things happen and opportunities happen, and people grow and move up to different levels. And as the company grows, you need more managers, you need more people to be responsible, and that creates that good culture of growth and aggressiveness. We’re very aggressive here, and those types of people gravitate toward us. It’s amazing. We hire people who have been in the business for many years, we hire people coming out of college, too, but there’s people that have come here that have worked other places for 10 to 15 years and they come here and say, ‘This is unreal. I’ve been in the business 15 years and this is like getting on the autobahn every day.’ It’s high energy and that’s what creates opportunities and that’s why we’re successful — it’s because of our people. And it’s a lot of young people, and they’re aggressive and they work hard, and that’s the culture. Those people gravitate to us, and the people that don’t want to work hard, they kind of deselect themselves.
Find your talent, then throw him or her into the frying pan. You can tell when you sit in a meeting with a young guy and he sits back and he’s a sponge and he’s absorbing things, but he understands exactly what’s going on. He’s not the one guy sitting there being a Mr. Know-It-All, and you can look at those traits and personalities and if you see those people, stick them into some management training and make sure those people are getting thrown into the frying pan and can handle pressure.
So those traits come out early, but through our career, it’s also amazing when you see a guy, you say, ‘That guy’s pretty quiet; I don’t know if he could ever be a manager,’ and the next thing you know, he’s got a couple years under his belt, he really matures as a young adult, and he wants to take on the responsibility — because you’d be surprised how many people out there want to be a manager but they don’t want the responsibility. You have to want that responsibility.
(Once you find talent), it’s very important that you communicate to them. And as a good manager, you have to let them fail and learn from their own mistakes, but don’t let them hang themselves. So we’ve grown this company by throwing people in the frying pan and seeing how they react, and that’s how we were taught the business. Nobody taught us the business. We were very aggressive and threw ourselves in the frying pan, and you’d be surprised how quick you learn what’s expected out of you.
But make sure you tell that person, ‘I’m going to give you more responsibility; I will put you in the frying pan, you’ll have a safety net, but you know what, I don’t want to use it.’ So you communicate to them and make sure that you say, ‘You’re underneath the microscope, buddy, and we’re going to back you but …’
You have to make sure you watch them. Managers have to watch them. In our business, you have project managers, project engineers, project superintendents, so not one guy is ever controlling the job. And those other team members, because they’re dedicated to the company, they’re not going to want to see a guy fail, either. So what happens is they kind of self-police each other. So they help shore those guys up, and if there is somebody who is weak and not doing their job, somebody raises their hand and says, ‘Hey, we need a little help over here because we might be in trouble.’ That’s how we grew this company. We said, ‘Hey, everybody makes mistakes. Let’s look at the mistakes, let’s help each other out and let’s move forward.’ So that’s how you police that in making sure the guy doesn’t hang himself.
Make new people aware of growth opportunities. We don’t do all the hiring any more because we’re big, but I’ll sit in on interviews still, and it’s good to hear the managers talk about, ‘where I was 10 years ago and where I’m at now.’ Our managers are people that have walked in the door coming out of college and are now running a huge division for us. So it’s not just an owner saying there’s opportunity here, it’s actually people that have been through these opportunities and they’re communicating that to the people that are coming on board, and on top of that, if you look at the history of this company, there’s definitely growth, so growth is automatically opportunity. You’d have to be almost blind to not see the opportunities, so it’s good to see the managers because they’ve had those opportunities and they’re willing, just like we were, to give everybody an opportunity.
How to reach: Marous Brothers Construction, (440) 951-3904 or www.marousbrothers.com
It’s impossible to get Eric Belcher to stop talking about the growth culture at his company.
Ask him about how InnerWorkings Inc. grew more than 45 percent from 2007 to 2008, and he’ll tell you it’s because of a culture of growth.
Ask him how the provider of managed print and promotional procurement solutions has gone from a start-up to more than 700 employees and $419 million in 2008 revenue in less than a decade, and he’ll tell you it’s because of a culture of growth that always has the next generation of talent ready.
Ask him if the Chicago Bulls have a shot at winning the Eastern Conference of the NBA next year, and he’ll tell you … well, you get the point.
But to be fair to Belcher, he’s not just talking about the culture at his company to sound like a good president and CEO. His company is growing at a breakneck rate in an otherwise stale industry. He has to have good people on hand and a stock of highly talented people ready for the next round of growth.
“So here we are, growing wild in a contracting industry, which makes recruiting of talent in our professional services world absolutely critical,” he says. “We are nothing other than the sum of the talent of our people and our reputation. We need to work as hard as we ever have to ensure that we’re really attracting the best talent in the industry, and I need to be doing that first and foremost.”
So it’s safe to say that nobody better understands how important maintaining the culture at InnerWorkings is than Belcher — and no one spends as much time as he does working on it. Despite the company’s large size, he still spends nearly half of his time recruiting talent. At any given time, Belcher has a robust list of the future superstars in his industry in Chicago and beyond, and that is what he’s using to position his company going forward.
Here, Belcher shares a few tips on how to recruit top industry talent.Spend your time recruiting
To keep the influx of talent at InnerWorkings constant, Belcher takes on the job of recruiting personally, noting that he spends somewhere between one-third and one-half of his time on the task.
But recruiting isn’t just visiting college campuses, sifting through old resumes or making a few phone calls to headhunters when big office jobs open up. Good recruiting begins when you start to see talent in fruit that may not be ripe for the picking.
“It’s not necessarily reacting to employment requests that come to the company but proactively seeking out talent,” Belcher says. “I feel as though in almost every conversation I have with somebody who is not employed by InnerWorkings, I’m wondering if there is a recruiting opportunity for our organization. So I would say a key trait of a successful leader is someone who is constantly looking to bring in the most talented individuals in the industry.”
That means putting time in on people who may not be on the active job market.
“It’s been my experience that many of the most talented people in the industry are gainfully employed and, in many ways and many cases, quite content with their current prospects at their place of employment,” Belcher says. “So the process of recruiting is not a 45-minute interview reviewing one’s background and resume. It’s keeping an ear to the ground to understand who is making a difference in the industry and then proactively reaching out and getting in touch with that individual.”
So you have to keep an eye on the all-stars you meet along the way, even if you don’t have a direct relationship currently. When you see someone with talent, find a way to build a better relationship.
“It can be an initial discussion to see if we might be able to reward some work to their organization or to reach out to them as a potential customer and get to know them in a personal way,” he says. “Over time, we help them to understand what our company is doing, the revolution, if you will, that we’re leading in our industry, and ultimately draw that talent into our world.
“So the process of recruiting for us is one that may take a year or longer from the time of the first meeting to ultimately being able to bring in a talented industry professional.”
The process clearly isn’t instantaneous, but it’s worth it to begin to build up a long list of people you can turn to when new opportunities arise.
“We not only are looking for individuals right now,” Belcher says, “but to develop a bench of people that we know well and draw upon in the years ahead as we look to round out our team.”Put the fit to the test
While Belcher is constantly turning casual conversations into mental recruiting lists, he knows that just because the cashier at lunch seemed smart, that doesn’t make her an automatic fit for InnerWorkings. One of the important things to look at is the person’s career aspirations.
“We’re looking for people that, like our company overall, are looking to grow at a fairly rapid clip,” he says.
Again, if you begin to make a list of people you think might fit in down the road, you can start to analyze them through your company lens. By watching their career path, you can glean more about their objectives and, at the same time, they can take more from you in occasional conversations.
“We get to know the individual in more detail and their goals and objectives and their track record,” Belcher says. “Secondly, though, the individual that we’re speaking with gets to know us. In many cases, we’ve hired people that we have a working relationship with as either a supplier or a customer for quite some time, and so the individuals that come to our organization having known us or worked with us a while have a very good sense for our culture. And our culture, by the way, is a culture that fosters hyper growth, and that’s not for everybody. ... We need individuals who have an entrepreneurial streak within their background.”
So Belcher digs for that entrepreneurial spirit. He says you don’t need an actual entrepreneur, but you need someone who has shown independence and moxie.
“Now that doesn’t necessarily mean that they’ve worked at a start-up, but that means that they have a fire in their belly and they want to make a difference and they want to make a mark,” he says.
So you have to look for people that have rallied around a cause or who have taken on big, risky projects on their own.
“We’ve developed a culture where there is a group of people rallying around the cause, pioneering this new way to buy and sell printed materials, and there is an energy and an enthusiasm, which I don’t think you find in companies that may be growing 5 to 10 percent a year,” he says. “There’s an excitement that ultimately captivates certain people that we’re recruiting.”Push talent forward
A big part of recruiting and keeping top talent has to do with another internal system: promotions. To keep top talent coming and to keep them happy when they arrive, you have to be willing to let people grow into new jobs quickly. Belcher himself is proof that it works, having joined the business in 2005 as the head of operations. He then moved up to chief operating officer before becoming president and, ultimately, CEO. He shares that as part of his pitch both internally and externally.
“I’m not unique on that front; there are many people within our company that have seen an opportunity to do something new and exciting and better within our organization and have personally worked to make that vision become a reality, rolled up their sleeves and subsequently have been rewarded from a career standpoint,” he says.
But most leaders are a bit hesitant to promote people quickly. How do you know who and when to promote? Belcher says you ask people to step up and then you let them do it — but you don’t make a secretary the chief financial officer, you have them take one pay bump at a time.
“We look for individuals who will raise their hand and look for an opportunity to go above and beyond — one step above and beyond — what their current job description might state,” he says.
Once someone has been trained and shows exemplary competence in a new role, there’s no reason to hold them there just for the sake of holding them there.
“They’ll only be constrained by what they’re personally able to accomplish, and we have plenty of examples of people who have come in and been promoted and been promoted many times over within short periods of time,” Belcher says.
Of course, letting people grow up that fast will mean some employees will reach their limits. When that happens, you have to decide what you’ve run into.
“There are two options with somebody who is not able to keep up.” Belcher says. “One is to make sure you don’t promote them beyond their capabilities, and if they’re a valuable, contributing member of the team within their portion of the business, you make sure you don’t pull them out of their comfort zone and into a world where they’re not going to be successful.”
Dealing with that comes back to only considering people who have expressed interest in moving up and, when people are about to move up, having a very frank conversation about what the exact specifications of that job will be.
“Many employees will know when they might be moving out of their comfort level and into an environment which could stretch their own personal professional goals and objectives,” Belcher says. “So when opportunities arise to take on ever-increasing portions of the business or responsibility, we get into a very open dialogue with our employees about what the new challenge would be if they were to take it. We tell them how we would define success in the role, what the expectations of the individual might be, and, really, the more open and frank the dialogue, the greater the chance we have of not taking a situation, which may be working well for the company and one of our team members, and making it into a situation where it’s actually bad for everybody.”
The second issue that you can run into is someone who simply cannot hang with a fast-paced culture.
“Now, if they’re not able to contribute in any way (because) the business is just too rapidly changing and, frankly, too aggressive and ambitious for their liking, part of developing ... the hyper growth component is not compromising when a situation is obviously not going to work out,” he says.
But when you’re recruiting wisely and looking to the people stepping up for more work, Belcher says the second problem is uncommon because you won’t make yourself fall in love with an internal candidate when a job opens up.
“Again, I’m probably sounding a little bit like a broken record here, but the way in which a company is able to protect itself best against a scenario where they promote somebody into a position, which is uncomfortable for that employee, is to have good, credible alternatives available,” he says. “We do everything we can to have a great, deep bench of talent whom we’ve known for some time and know us well. So when a specific opportunity arises where we don’t have a match internally, we can engage in a meaningful dialogue in a relatively short period of time with somebody from outside of InnerWorkings.”
How to reach: InnerWorkings Inc., (312) 642-3700 or www.inwk.com
Phil Graffy has a hard time giving his people a hard time.
Graffy, the owner, president and CEO of Interstate Lift Trucks Inc., is constantly looking for ways to improve customer service, but the fact of the matter is that his roughly 100 employees get it.
The new and used dealer of Toyota forklifts has been honored again and again with Toyota’s prestigious President’s Award, given to its top dealers. With his people polishing that brass, it can be hard to criticize.
“They’ll say, ‘We just won the award as the best and you’re not happy now?’” Graffy says. “I get a lot of that, so I’ll say, ‘OK, we’ll celebrate for the next 24 hours.’”
When that celebrating is over, however, it’s back to focusing on things like money-back guarantees for the rare unhappy customer and creating systems to maximize efficiency for buyers.
Smart Business spoke with Graffy about how you can create simple systems to ensure customer satisfaction and why a good starting point is never saying no.
Say no to no. We’re a can-do company. The reality is I started out in sales, so I’m very customer-driven. As far as I’m concerned, the word no is nonexistent, and it’s up to me to show them a better way through technology and through training.
We’re fairly large now, but we treat every customer like they’re the only customers we have. And just by the fact that we never learn how to say no, it always comes back and we’ll have brainstorming groups and things like that based on customers. And a lot of times we’ll make better practices based on new ways we’ve served the customers.
We have a series of values we tried to create. For everything with the customer, it’s a can-do attitude — that supports the yes theory all the time.
Actually, we get excited about customer challenges. … I had a customer call up one time, it’s Friday and it’s 1 in the afternoon, he just got a contract, and he said he just picked up a new customer and called us up and said he needed 12 forklifts, and we just said, ‘OK.’ They wanted 12 brand-new lift trucks with special attachments, so we went out in the marketplace and, through our rental place and wholesalers, and any way that we could, begged, borrowed and dealed, and we found the attachments. Even though it was a Band-Aid approach, we got the customer up and running and then got the complete order together in the next few weeks. What we learned from that is there’s just nothing we can’t do, so we’ll say yes and work from there.
Create systems that make an impact with customers. I’m an expense item. Bottom line: When you buy a forklift, it’s going to cost you money, and it’s a necessary evil for them, so to speak. So what we try to do is create the best efficiencies that we can … show customers how they can save money year in and year out, and at any point in time, they can call and find out what the cost per hour is — which is almost like a cost per mile to put it into the car industry terms everybody knows.
We’ve created an accrual account, and it’s there to support customers. Let’s say a guy takes a chance on getting a forklift, and for some reason, two or three of them break down. … What we’ll do is say, ‘Listen, if you need a part or service to take care of your truck, we guarantee same-day service or same-day part. If we can’t get you up and running, because our mission is never, never have a customer have downtime … we’ll send you a free loaner. So you’re never, ever going to be down because of me. So it’s very easy to get people to switch from competitors because there is no risk. That’s big from a sales standpoint because that’s the biggest thing that holds people back. They say, ‘I don’t want to make a decision and get in trouble because you’re saying the right stuff, but everybody is.’ We back it up by making sure a customer is never down.
And there’s money just sitting in there to take care of the rental department when they take it out. And the beauty for me is, for maybe a few hundred bucks it costs me to get a truck out to the customer, I’ve taken care of a guy that probably would have told 10 people that we screwed up, and he probably would have gotten in trouble with his company and etc., etc.
Hire, train and then listen for new solutions. You have to be a good listener, you have to be a good implementer and then you have to get out of the way. Manage and get out of the way. It’s really training and trust and delegation.
That all comes down to trust, and in the beginning, we teach our processes and teach what we do. I want people to understand what we do and then really, once they get involved in it and understand it and understand their job, I make sure that rather than micromanage the job itself, I follow them around and make sure the delegation happens and the action steps happen. Once you get trust going, and you know that person can add a lot of value, then you start listening to feedback. Everybody wants to be an impact player. For example, (our CFO) is an impact guy, but he had to learn our system. Once he learned it, from there he comes back and teaches us to do it even better.
We won’t bring people on who aren’t customer-driven. We talk and talk and talk to them, and if they’re not customer-driven, and we get any negative feedback on the road or don’t like their attitude in house, we can’t have that. I’ll tell you what, it’s probably one in every three just doesn’t do it in the interview process; you can say, ‘That guy just doesn’t have it.’ And if they haven’t experienced it, they’ll probably have a hard time doing it.
How to reach: Interstate Lift Trucks Inc., (216) 328-0970 or www.ilttoyotalift.com
Today, Doug Marcille tells his story only in terms of the days he was just about sure his company was going to go out of business.
The first such day came at the onset of 2003, shortly after Marcille joined U.S. Gas & Electric Inc. He’d come aboard the company as chief financial officer because he loved the business model at the natural gas reseller, but it didn’t take long to see something was wrong.
“The retail end at the time was really kind of a mess, to say the least,” says Marcille, now the company’s president and CEO. “The company was selling fixed-price contracts that were underwater, the market had moved against those contracts, and the company wasn’t hedging or doing any other risk management, so I actually closed the retail gas business on the fourth day I was at the company.”
Marcille did what he could, fixing the retail gas model and slowly building the company back up. But, just as he thought things were going to turn, he got a knock from the SEC in the fall of 2003, which started an informal inquiry into the way additional capital was raised using private placements in 2002 and early 2003.
“I’d never had a knock on the door like that before, and I did not know what would happen,” he says. “You can imagine getting that knock and thinking it’s the end of the world.”
It very nearly was the end of the world for USG&E. The company had sales of less than $2.8 million in 2004, as it was crippled by a standstill agreement with the SEC. Marcille had to completely retrench, cutting the company from 50 people to just two by 2005. Suddenly the lonely top executive of a two-person company, Marcille had to grow the company organically.
That process wasn’t easy, but Marcille started by making the personnel cuts to keep USG&E alive and then slowly built it back up on the backs of known talent. As he started to get the company above water, he leveraged his good relationships to spark growth.
Make the cuts
Shortly after the SEC knocked on the door, Marcille realized that he had to make some drastic cuts internally and externally.
“The first thing we did was fire about three-fourths of our customers,” he says. “And the reason we did that was because in this business, revenue really lags, the cash conversion cycle from selling the gas to collecting the cash is longer than the payable cycle. We knew that if we got rid of some of our customers it would create positive cash flow.”
Once he got through that, he had to deal with another tough decision: letting people go. If you want to come back to life, sometimes you have to run with a skeleton crew. Even though the people at the company were legacy hires, Marcille still struggled with the process. In the end, he cut from 50 employees to less than 10 on one Friday.
“That was a very drastic maneuver that was very important for us to have credibility with the SEC,” he says.
It also gave the company more ability to acquire new customers after the original plan to generate cash.
“So we downsized the operation from about 50 to 7 or 8 people,” Marcille says. “We got rid of customers to generate cash flow going forward for a few months, and we used that cash to start acquiring new customers at a very slow rate because we could only afford a certain amount of customer acquisition costs, and used the money that we weren’t using for customer acquisition cost to pay our drastically reduced overhead, so this is classic checkbook, razor’s edge management.”
Marcille says a quick break with nonessential personnel is best for everyone involved. And who, exactly, is essential personnel when you have to run at roughly 20 percent capacity? It’s those people who understand the core things that have to be done to keep your business alive — those with an understanding of regulations, legal issues or other matters that, if handled incorrectly, could sink you.
“One of the most important things was to make sure there were people, even if it’s a skeleton staff, who understand not only the business but also the regulatory environment,” he says. “That was a critical priority, and actually, frankly, it was more important than sales at any given point in time because we could go out of business either because we lost our license or we incurred a substantial fine because we took our eye off the compliance ball — whereas we had a certain customer base at that time that was generating gross profit and we could manage that gross profit and not spend more than that.”
Build with known talent
As he learned how to handle the absolute essentials of the business, Marcille eventually cut the company down to two people by the start of 2005: his CFO and himself. He kept the company alive by moving from vendor credits to a factor (for which he was paying 48 percent interest, given the company’s troubles). By year’s end, USG&E was still operating at a loss, but was up to $9.6 million in sales and Marcille began to slowly add people.
This was a tricky process, because the company was still hanging by a thread. Marcille’s recommendation for how you can survive a cycle like that doesn’t include hiring industry experts.
“We started layering in other people that we knew and had worked with in other companies,” he says. “And that process was also very important to our survival because we had critical functions that needed performed as we got bigger, and we obviously weren’t able to do all of those functions ourselves, but we couldn’t afford to make any hiring mistakes.”
It sounds counterintuitive to build a business up on people you know, regardless of industry experience, but Marcille says that’s the No. 1 priority.
“We started this without knowledge or experience, but that wasn’t as important as knowing the talent that I had around me,” he says. “We were hiring the person we thought they were. So what we did was we outsourced the industry-specific things we needed, such as our natural gas supply chain or the EDI function that we needed in order to exchange information between us and the utility.”
That’s not to say that Marcille just hired anyone he’d ever worked with. He’d probably worked with thousands of people in his career, but he says you have a feel for those with the necessary skills for the ultimate challenge.
“The way I thought of it was, there were many times that there were people that I really wished worked here,” he says. “And I held off approaching them until I was comfortable that there was enough substance in the company and there was enough of a possibility that we were going to continue before I approached them.”
Marcille used that philosophy to get through 2005 and 2006. With the close of the informal SEC investigation — USG&E settled the case without admitting or denying wrongdoing — the company grew to $23.3 million in sales but was still relying on a factor, now at about 27 percent interest. To keep up, the company had to grow or die.
“When you’re going to do that, it’s very important to keep a lot of things within the company moving forward on parallel tracks,” Marcille says. “And if any one of those critical areas gets too far ahead or too far behind, especially when you’re extremely thinly capitalized, you’re courting disaster. So one of the things that we were able to take off the table was personnel, because we knew that we had the right people.”
B uild credibility
The SEC nightmare may have ended, but by the end of 2006 Marcille was having another one of those moments: The company factor unexpectedly let him know USG&E bumped up against its borrowing limit. Though the company would turn in nearly $53 million in sales in 2007, survival only came because Marcille hit the pavement and met an interested New York Stock Exchange-graded business development fund that became a controlling shareholder.
Marcille says there’s a lesson he learned along the way that will help you during a crunch: Create reliable relationships with employees, clients and creditors by keeping close tabs on what you say you’ll do and reminding them of whether you did it or not and why.
Marcille had leveraged his relationship with the vendor to build a relationship with the factor, so this time around he asked the factor to be his resource. The factor became his top recommendation based on the company’s follow through on promises. To this day, he keeps close tabs with that factor and makes him a part of company events.
The effort to build credibility also means documenting and keeping promises to your employees.
“I have to do everything in my power to keep those promises so that people know when I’m telling them other things about what the future possibilities are that I have credibility,” he says.
Marcille used that strategy with employees throughout the process of rebuilding. It wasn’t easy asking former co-workers to jump on a nearly deserted ship, but he came bearing employment contracts.
“One of the ways that I would prove our worth is I’ll put the money on the table in the form of employment contracts,” he says. “All the executives here have really favorable employment contracts. And what that does is it creates a reciprocal commitment and that’s key, so employment contracts have been a very big part of giving people comfort that their efforts are going to be respected and that the company has loyalty to them and that generates loyalty to the company.”
He brought people in on the promise of enjoying the potential fruits of their labor, giving employees an ownership percentage.
“I don’t think you can argue against the formula that, as the senior executive, I would rather have a much lower percentage ownership of a much larger company than own 100 percent of a smaller, less profitable company,” he says. “So spread it around; share the wealth so people know there’s an upside.”
Marcille also keeps track of everything he told people coming in about the company and their role. Whenever he makes a new plan, he puts it next to previous plans so things on the agenda don’t disappear. He never deletes any e-mail, and he uses any downtime to sort them by person to make sure he’s either delivered on every promise he’s made or both parties know where they stand.
“I’ll go back to the earliest e-mails for them, which sometimes goes back to the hiring process, the initial job descriptions, or even just some of the back and forth on issues that you forget you’ve either conquered or you’ve embedded into your business model or you’ve forgotten about,” he says. “So you can say, ‘Jeez, I remember saying this to Joe and, yeah, we did it’ — or, if we haven’t done it, ‘We’re working toward it.’”
When the 2008 numbers came in at USG&E, Marcille no doubt had a good, long look through those e-mails. The company had grown to 75 employees and the days of 48 percent interest and SEC queries were just story fodder. The happy ending is 2008’s financials: The company reached more than $106 million in sales, more than doubling the previous year’s numbers.
Marcille isn’t ready to concede victory, but he can admit now that those near-death days make for a pretty good tale.
“It’s a good story,” he says. “But the day the shareholders get a return on investment, it will be an amazing story. Right now, I think it’s just a very good story.”
How to reach: U.S. Gas & Electric Inc. (888) 947-7880 or www.usgande.com
Lisa Rubino loves a good joke.
Asked about spending 30 years in her profession, she’s quick to point out that makes her 35 — since she started working when she was 5.
OK, that’s probably not doing the joke justice. The point is Rubino has used humor throughout her career to help make everyone’s job a little easier.
But when she moved into the role of president of Molina Healthcare of California, a subsidiary of $3-plus billion Molina Healthcare Inc., in 2008, even she turned off the laughter for a minute. What she saw at the company was 370 employees moving in about 370 different directions. And though she’d had success in another leadership position at the managed care organization that delivers health care services to people eligible for government-sponsored programs, the California subsidiary had been through nearly a president per year from 2004 to 2007.
“That was hard because there was an absence of leadership, not only in the president and CEO but throughout middle management,” she says of her unit, which posted 2007 revenue of $379 million. “And when you have an absence of leadership, people will decide for themselves what’s right, and everybody was doing what they thought was right, it just wasn’t coordinated. So it was really shifting working hard to working smart and creating what I call a culture of accountability — aligning their work against a vision and delivering on it.”
Creating and laying out a vision is tough, but Rubino’s plan at Molina was straightforward. Before she dove in, she used her humor and social skills to build some credit, working with employees of all levels to get feedback and talk shop. When she had a handle on that, she created a rough outline for her vision and worked with senior leaders and managers to tweak it. Once she rolled it out, she used it as a road map through all the good and bad that Molina faced.
Create comfort in your leadership
Before Rubino could get too deep into setting out her vision, she had to deal with some of Molina’s ghosts. Previous visions had come and gone, and there are always concerns from employees when leadership sets out a new path. What Rubino has learned is that step No. 1 is to build confidence in your leadership. Whether you’re a new leader or just laying out a new path, help people understand you and your thinking so you’ll get feedback that will hone your vision and start earning buy-in.
“People come to leaders when they feel comfortable and they feel that folks are approachable,” she says. “The people closest to the work, they know stuff and they’ll tell you stuff, and they state the obvious sometimes.”
For Rubino, being approachable means she gets to use her well-honed sense of humor to help knock people’s guards down. But before you decide to start every meeting with your best “So-and-so walks into a bar line,” you need to realize being a funny boss is about tastefulness and putting the joke on yourself or the external pressures you’re facing.
“In my presentations, I have cartoons, and we call our budget crisis ‘As Sacramento Swirls’ starring Arnold Schwarzenegger,” she says. “You just weave that into the dialogue, into the conversation, you weave it into your presentations, and it just gets people to relax. … You have to not take yourself that seriously — and humor, I’ve found, in any circumstance, is a way to help people be comfortable.”
Further building up your approachability can come from giving people a comfortable setting. Rubino does “Lunches with Lisa” where anyone in the company can join her for lunch. The meetings are purposefully designed with no formal presentation or agenda, they just start with regular conversations and people are allowed to ask any question. Her ability to answer those honestly builds credibility. So does her follow-up. At one luncheon someone asked why Molina didn’t have a contract with a certain hospital. Rubino said it was probably too expensive.
“And she said, ‘Well, our patients go there anyhow,” Rubino says. “So I came back and ran a report, and we had spent millions of dollars at this hospital as a noncontracted provider, and guess what, we have a contract with them today.”
Rubino circled back and told the woman how the information helped. Don’t always expect that much help, but your open mind encourages participation and starts buy-in.
All this doesn’t mean you’re getting invited to Friday happy hour, of course.
“It’s probably safe to say they never see you not as the boss because you’re (always) the boss,” Rubino says. “… No matter what you do people aren’t going to be completely comfortable, but I just put myself in position to have people come to me. I’ve been here less than two years and I’ve already seen the culture shift. All it took was talking with people, setting a vision, steering a course, being visible, being honest and admitting that I don’t know everything.”
And even if you don’t have any good jokes, putting effort toward having people come to you will be helpful. Rubino watched one former boss who couldn’t find a way to let his guard down become a lonely general.
“Colin Powell said (that) you know as a leader in the military that you are in trouble when people stop asking you questions, stop coming to you with information, and I saw that so vividly with this guy because no one wanted to talk to him,” she says. “People wanted to get out of the room as fast as they could, and when you create that, you’re in trouble. So I’ve done everything in my power in my career to not have that.”
Build leadership-level buy-in
Once you’ve built some credibility with employees, it’s time to change your focus to collaborating on a vision. Rubino started with her thoughts and then involved her leaders in stages.
“I crafted what I thought were the key priorities for the organization and ran that by the (senior leadership team),” Rubino says. “So I said, ‘It’s ’08; by the end of ’09, we’ll have created this culture of accountability, which means we are using data-based decision-making, we have engaged employees, and by doing this — and I’m paraphrasing — we’re going to have repeatable, sustainable performance and that means top-line growth and bottom-line growth.’”
Rubino let her senior leadership team massage her original thoughts and then let that version take alterations at the director level. The core things Rubino wanted — accountability, data-based decision-making and the like — had to remain intact, but she wanted thoughts on everything from time frames to the necessary personnel.
Once everyone had a look, Rubino blew up a big copy of it and sat down with all those involved. She hung the document on the wall of the meeting room.
“It’s sort of like the Declaration of Independence,” she said. “We put it up on a big board, and I said, ‘We started with some thoughts from me, you’ve all had input, if this is what we believe, throughout this meeting I want you to sign this. … And if you can’t sign today, I don’t want to strong arm you, but you have to come tell me why you can’t sign and if we have to do something different before you can sign.’”
There were 30 people in that meeting and more than 70 percent signed it that day.
Rubino was surprised by the two objections those leftover still had. First were minor alterations they simply hadn’t mentioned previously. Solving that was easy.
“I’d say ‘This is our Declaration of Independence, so we’ll add it,” Rubino says.
The second had nothing to do with the vision.
“The people that came to see me were the people who had been in the company the longest,” she says. “They would say, ‘We’ve seen people come and go, you’re probably going to go, too, and this agenda is not going to matter.’ And I said, ‘I hate to tell you, but I’m not going anywhere. I’ve only had four jobs in 30 years; I intend to stay.’ It was more older folks, skeptical, they didn’t think that the corporate entity would support us. … There was not a lot of course correction to the statement of vision but just hearing them out.”
A few final dissenters still didn’t sign after those private meetings, so Rubino put the declaration on the outside of her door and had her assistant keep a casual eye on it. Days later, all the names were inked. Rubino says her takeaway lesson was sometimes people put up an objection just to be heard individually. The solution is patience and a format for them to be heard.
“Eventually, we got everybody to sign,” she says. “You’ve got to put a framework in place and people have to feel that they’re giving input to that.”
Revise as needed
Before Rubino could sit back and enjoy successfully rolling out her vision she hit the same bump you did in 2008: The economy fell apart. Suddenly realistic expectations were meeting a new reality that included a $42 billion state budget shortfall. Rubino handled it with her usual humor — it was a great storyline for ‘As Sacramento Swirls’ — and also used the strength of the agreed-upon vision.
“As a leader, you’ve got to be able to create clarity out of chaos because there are so many things that could cause people to get out of focus,” she says.
Instead of turning her back on the vision, Rubino began to use it as the original road map that now had detours in it. She explained those detours with instructions on how to get through them instead of having her people worry about the whole path.
“We get in front of people and just tell them the brutal reality, there is a $42 billion shortfall in the budget, it is a $50 million problem for Medi-Cal in this state, and for us in California, it was a $3 million problem,” she says. “Break it down from the macro to the micro, to how it impacts us and what it means to have a $3 million problem. We said, ‘Here are the things we’re doing about it.’ So it was just taking the outside, bringing it in, and then focusing on what answers we have for a $3 or $4 million problem.”
The fact that there was an active vision gave everything that Rubino did a backbone. When she laid out a slight course correction, she was able to lean on the original vision to show how the adaptation put the team back on the path.
“Before, we didn’t have a plan, now we have a plan, and once you have a plan, you can go back,” she says. “I look at it as a recipe. I’m not a cook, so I’m going to mess this up, but if I’m going to make a cake and it’s for six people and instead it’s going to be for 24, I’m just going to add more ingredients. So it’s just what ingredients do you add, what ingredients do you take away.”
The end result is that Rubino’s people are using her vision to grow the company. While many companies were crying for help, Molina grew to $417 million for 2008, an improvement of more than 10 percent from 2007. And while that was celebrated, Rubino is even more interested in how the vision continues to unite people.
“We grew in a flat market, so that’s exciting,” she says. “But what I’m most excited about is the cultural shift — really seeing people focused on the business, understanding the details of the business, starting to use data more easily to solve business problems or coming up with business solutions, hearing people say, ‘It feels different; I’m glad you’re here. It’s not the same company.’”
How to reach: Molina Healthcare of California, (800) 526-8196 or www.molinahealthcare.com
Arthur B. Culvahouse Jr. is no stranger to handling situations of
international importance. Culvahouse, who served as White
House counsel for President Ronald Reagan from March 1987 to
January 1989, was brought in to that spot by former Tennessee
Sen. Howard Baker. When he first took the post, he had a meeting
with Baker that he never forgot. “I went into the White House at
the same time that Howard Baker did to be chief of staff,”
Culvahouse says. “Senator Baker had recommended me to be
White House counsel. Before we went in, we met at Howard’s
house, and he said we would have three, and only three, priorities,
and everything else could not distract from the priorities.” Those
first three priorities, which included getting Reagan through the
Iran-Contra investigations, negotiating an arms agreement with
the Soviet Union and getting a Republican to succeed President
Reagan, were laid out clearly so that Culvahouse was on the same
page with White House expectations.
So when it comes to his daily work as chairman at O’Melveny &
Myers LLP, the international law firm, Culvahouse still thinks
about that conversation. His firm has more than 2,200 personnel,
including more than 1,000 lawyers, and has offices all over the
globe. It would be easy, then, for any of those offices to take off in
its own direction. But like his initial conversation with Baker,
Culvahouse and the senior leaders at O’Melveny focus on getting
everyone on the same page.
So how do you get 2,200 people working anywhere from
Shanghai to San Francisco on the same page while still finding the
time to conduct your business every day? It’s not easy, but
Culvahouse and O’Melveny have done it by unifying the firm
around its values statement, ramping up communication frequency and channels, and when a solid majority is reached, moving forward without hesitation.
Use a guiding principle
It’s just a guess, but you probably have taken some time at your
company to put together something you consider to be a values
statement or a mission statement — some ideas and practices that
you think define what your company is about.
But after you went through that process, did you ever make them
the foundation of what you were doing?
While many companies have things they think drive their company, most don’t use their values as a guiding principle for daily
interactions. At O’Melveny, the firm uses the values it wants to live
by to drive everything it does, from hiring to giving raises.
“All of our messaging and everything we do is guided by our values, we’re a value-driven firm, so whether it’s compensating partners, deciding who to call back from law school interviews to evaluating administrative assistants or marketing professionals, each
of us is evaluated in terms of excellence, leadership and citizenship. Almost all of our messaging is focused around our values and
that is a unifying theme,” Culvahouse says.
“(Values) are the guiding stars for everything we do, from compensation to performance rankings to admitting lateral partners,” Culvahouse says. “We passed on particular acquisitions because we
thought they were values challenged. If a partner is considered by
associates to be unreasonable and not a good colleague in terms of
working for, we will have a conversation with that partner and we
will coach him or her on how to be a more value-driven colleague.”
The idea is simple: If you have four core values that you want
your people to live by, do something today to show people that
those are important so everyone realizes you aren’t just floating
around big ideas — you’ve created a shared rallying point. For
example, O’Melveny makes community service an important
value, so the company regularly shares the good work that people
do in firmwide communication.
Another piece is celebrating your guiding principle. While most
leaders will happily share with you their company values, how
many of them have a process for celebrating them in a way that
encourages people to make them part of daily life? At O’Melveny,
values awards are given to those who exemplify the firm’s values.
“We give values awards every year to two partners, two associates in counsel and two members of our staff, so that binds us
together in ways that are unique,” Culvahouse says.
And to conjure up even more interest in the firm’s values, those
awards are not just handed out by senior leaders, there is a
process that allows anyone in the company to fill out a nomination
for someone else.
“Everyone in the firm, from the most senior partner to the most
junior paralegal hire in Shanghai, are encouraged to nominate their
colleagues to receive the firm values award, and we have several
thousand nominations every year,” Culvahouse says. “So I think
receiving the values award, which is not a big deal financially, it
might be a very nice watch or something like that, but people are
really touched and moved to get it. It reminds us of the glue that
binds us together, it reminds us what is special about our firm. As
we become much more geographically diverse and much larger,
practicing law, in many respects, with much greater intensity than
our forebearers, we don’t want to lose that part of our heritage.”
The celebration of your guiding principle also gives you a database for people that can help get others behind your company. At
O’Melveny, Culvahouse and other senior leaders rely on a values
committee to help push their efforts to get people on the same
page. They wanted this committee to be diverse in age and scope
so it would have more effectiveness, which would normally be a
hard vetting process with 2,200 people. But O’Melveny had little
difficulty, as the firm already had a group of values awards winners and incoming applications full of reasons to include potential award winners to help guide that decision-making process.
Expand and repeat your
Beyond using a unifying theme to get your people behind you,
you also need to take into consideration how well your messages
are getting across. Consider the struggles that Culvahouse has at
O’Melveny. The firm has more than 1,000 lawyers spread across
the globe. His decision-makers aren’t just busy, they’re working in
different time zones and often are inundated with e-mails and
phone calls. That’s how he came up with a rule of thumb for communication.
“I read someplace, I can no longer quote you the source, that says
you need tell the average law firm partner something eight times
before it really sinks in,” he says.
It’s not that Culvahouse thinks his people intentionally block out
messages, he just knows that there is a lot of information out there.
“We live in a world of communication overload, so if you communicate something eight times, you’re hoping at least one of the
messages gets through and is retained,” he says.
“You can say it’s really, really important that we have acquisition
finance capacity in China, but if you say it only once, you may only
have 20 partners that heard you.”
And if you are only getting it across to 20 people, then everyone
else is already down a path to misunderstanding.
“And if our partners don’t have current and up-to-date information, then they will assume the worst, which is what we’re taught
to do as lawyers, to imagine the unimaginable horrors,”
So Culvahouse follows the eight-times rule by constantly considering how important it is to get messages to people not just several times
but also through several avenues. One reason for that is obvious: A
law firm doesn’t just throw its strategic plans up on a blog where the
world can see it. But there’s more to it than that. Part of trying to get
something across is understanding that some people might have one
method of communication that they often ignore or one that they are
constantly tied to. The best communication strategies include not just
consistency of message but also different forums.
“I think each one adds value,” he says. “One-on-ones or small
groups are the most effective, but they’re the most time-consuming.
We try to be a transparent firm, all of our financial information, our
strategic plan, we have no secrets from our partners.”
That means that O’Melveny has diversified its communication
strategies. The company does the usual stuff to lay groundwork —
off-site partner meetings, practice group retreats, etc. — but also
makes an effort to have communications available when people
can get to them. The firm has 90-minute videos that it places online
so people in different time zones can access them at any time. The
firm also is completely open with information, sharing financial
decisions and structure so that that no other communications
seem shrouded in mystery.
Beyond that, the governance structure of the firm has adapted to
include an executive committee that is made up of those value-award-winning types that acts as an additional bandwidth for communication between senior leadership and the firm at large.
All of this helps Culvahouse create a firm where people have consistent outlets that help them understand the firm’s direction.
“Every partner understands that they’re entitled to information,
and it’s really our responsibility to respond to that need because our
partners are very good lawyers and they want to understand decisions,” Culvahouse says. “Lawyers by style are not command-and-control types, we don’t salute and say ‘yes sir’ or ‘yes ma’am,’ and it
takes some convincing and some explanation, so you really need a
Run with a healthy majority
While solid communications come from a guiding principle and
an effort to push the message in multiple formats, you also have
to respect the fact that there is a timetable on decision-making. It
may only take one person to hang a jury, but you cannot let one
naysayer to your plan destroy your business. Culvahouse would
love to get a vote of 100 percent confidence in everything that he
does, but he knows that getting everyone on the same page means
running with a healthy majority instead of constantly circling
back and changing plans.
“Once you reach a confidence level that is 66 2/3 percent or
greater, and this is in respect to a particular course of action or particular strategy, then all other time is best spent on executing rather
than trying to reach a higher confidence level,” he says.
So while O’Melveny is constantly pushing the firm’s value messages and trying to keep everyone in touch, Culvahouse is looking
for that magic two-thirds majority of his senior decision-makers
before he pushes a decision. Working for a higher than normal
majority will help keep people on the same page with what you’re
doing because you’ll have high support, but not waiting for everything to come in at 100 percent will keep you nimble. O’Melveny is
a juggernaut in the legal world, but Culvahouse knows that its success leans heavily on the fact that the firm can quickly get everyone on the same page and get strong execution on an idea.
“It’s really appropriate for O’Melveny, because we as lawyers,
being conservative, not politically but in terms of running our own
business, being very good at imagining unimaginable horribles,
would want to really try to achieve a much higher confidence level
and that detracts from being nimble and decisive and opportunistic or strategically opportunistic,” he says. “So ... while I think as
lawyers we should always be very careful, but we need to run it
like a business, and frankly, fierce execution has been one of our
strengths over the past eight years. There’s nothing in our strategic
plans that is so extraordinarily creative that anyone would be surprised by what’s there. A lot of what we try to do is pretty obvious
in many respects. It wouldn’t knock people out, but we’ve been
pretty darn good at execution.”
HOW TO REACH: O’Melveny & Myers LLP, (800) 635-2189 or www.omm.com
Pedro A. Capó was born into the furniture business.
Before he was part owner and chief operating officer at El DoradoFurniture Corp., Capó watched his father build it from the groundup. Today, Capó and his six brothers all share in the leadership of thecompany, keeping the family element prevalent in the retail furniturestore chain.
Of course, as the company has grown to $166 million, even a furniture-first family like the Capós can’t do everything themselves.And not everyone in the world has the natural feel for the businessor cares about quality the way the family does. So as the companyhas grown to 750 employees, Capó has had to get people to takehis family business as seriously as he does. That requires not onlygetting them interested in the family business but also using astrong sense of leadership to encourage people to get behind thecompany’s belief in professionalism.
“You have to be a visionary and know where to go and how to getpeople to follow you there,” he says. “And unless you have that,you can have the best product in the world, you can have the greatest organization in the world, but you always have to know whereyou are going to be as a company tomorrow, and you have to convince and entice — not necessarily sell — entice your whole teamto follow you there. The word is basically right there, you can’t bea good leader if you ‘manage.’”
So while El Dorado Furniture makes it a point to welcome peopleto the family when they join the organization, Capó makes the distinction on the traditional family business model, demanding professionalism and passion from each employee. That can get a lot harderas a company grows, so he makes sure the company hires right, trainspeople in full detail, gives people a chance to retrain if they fail, andthen if they show they can match the family quality, Capó gives thema chance to move up the ranks.
Start with professionals
The idea of El Dorado Furniture as both a family and professional place starts at the beginning: If Capó is going to hire you,you better start off by showing you’re a pleasant person — someone he and the rest of the brothers could introduce over a nicedinner.
“We hire people that you would gladly invite them to your homefor dinner,” Capó says. “That’s basically the rule of thumb — youwant to make sure they’re pleasant people, people that are goingto respect other people as well as respect you in the process.”
But just having dinner manners doesn’t cut the mustard entirely.If you want to hire a winner, you also better look for someone whohas the professional credentials. That means you should take hisor her resume with a grain of salt.
“When you’re in the interviewing process, people will tell youanything or everything you want to hear,” Capó says. “Theresume, the same thing. Now, with the Internet, you don’t seeas much of the people physically, and they put a bunch of stuffin there that they’ve done and most of the stuff they put inthere, it’s not necessarily true.”
To vet their professionalism, Capó notes that the devil is in thedetails.
“We do an interview, and the person is called to be here at 9 inthe morning, if the person comes at 9:01, we probably would notsee him again,” he says. “If you call us and say, ‘I’m sorry I’m late’or whatever, that’s fine, I will wait for you until the end of time.When they fill out an application, there are instructions, and weactually look at everything, the way they fill out the applicationand if they give all the information, and you start to get a profileof that person. I mean sometimes people come in to us for a jobin sales and you come in in the morning with them in the elevator, and they don’t know who you are, and they don’t even say hior good morning, they don’t smile, it’s like, what are you doinghere?
“I’ve had people come in here for executive jobs in jeans and T-shirts ... and you say, ‘How do I eat this; what is going on here?’”
These simple tests, in conjunction with your normal hiring practices, act to help you flesh out someone’s attention to detail andprofessionalism, which is the first step in making a hire who willcare about your company.
Train your employees
Once you hire somebody, your training systems can really be thecatalyst for getting him or her to understand your interest in quality.
Capó’s company has El Dorado University, which is a trainingprogram where instructors from the company get qualified asdepartment experts to teach new people the ropes. Rather thanjust send a salesperson out on the floor, El Dorado Furniture givestwo to three weeks of training before a new person can even talkwith a customer. Giving extended time purely for training has distinct advantages, like the opportunity for a second look at anemployee’s professionalism and a chance to instill how importantyour standards are.
“Part of the training is the same way, if they’re supposed to comein for training at 9 o’clock and they’re not here, they get a warning:‘Tomorrow, if you come in at 9:01 and you’re not excused, pleasedon’t even show up. Because discipline is very, very important inthis business or any business,’” Capó says.
El Dorado Furniture is also constantly circling back withemployees to make sure they’re on top of the concepts they shouldknow. The company regularly sends leaders into stores just tocheck in on front-line employees. Capó also sits down with hisquota-based salespeople every two weeks to show people howthey are doing. Anyone who isn’t making the mark is sent back toa more expedited retraining session. Capó lays out an example of what the company does with salespeoplethat are coming up short: “We go throughthe entire process of the sale and say,‘Where are they, what are their faults?’because there is something that they’redoing wrong, and we say let’s look at thatand do a particular retraining on that particular subject, — and of course, we do arefresher on everything else,” he says.
That retraining session is not availableover and over again. If someone can’t do itin sales after the retraining session, Capóoffers the employee the opportunity totransition to another position — providedthe person is a good employee overall.
“We have some people that we know thatthey’re not going to make it in sales, butthey’re very good at everything else thatthey do — their paperwork, attendance,their personality, taking care of the customer issues and so forth,” he says. “So wegive them an opportunity, if we have anopening, to work in another department.”
If the problems a person goes to retraining for are about areas of professionalism,there is no such grace after a first coachingsession.
“Now, if the person is off in other areas,where they don’t have good attendance orthey don’t have good productivity, we dogive them the coaching, we train themagain, but from there, they are basically outthe door,” Capó says.
By giving the extra training and givingpeople the warning of being put throughretraining, Capó says you draw a clear linein the sand about expectations.
“We tell them, ‘If you keep doing thisthing, you’re never going to make it, soeither you try to make an effort or if youhave a problem, let us know, and let’s dealwith it and move on,” he says.
That personal attention doesn’t fix everyproblem, but Capó says it rehabilitates manyand even helps a few people realize they areexpected to and can do much more.
“I would say that probably about 60 percent of them [become good employees],”he says. “They might not become a super-star, but they actually get back on trackand see this is for real. And believe it or not,a lot of people don’t know their potential— there are people who have a lot of talent, but they’re missing that spark thatmakes everything else evolve.”
Capó’s interest in retraining employeeshits on another family element that’s prevalent at El Dorado Furniture: The companylikes to raise its own leaders.
“We’d rather have somebody inside thatknows the culture of the company andknows their way around the company,” hesays. “And when you hire somebody, evenif it’s a cleaning person, you say, ‘Could thisperson eventually be a supervisor, be aleader someday or be in charge of their particular area?’”
If you want to do that, you have to bethinking of someone’s potential and his orher interests right from the beginning.
“When they come for an interview ... theinterviewer would talk to the person a bitdeeper and say, ‘You know, how do you feelabout or what do you think about thisother position?’” Capó says.
This conversation is logged down in theperson’s original HR file to ensure that ElDorado Furniture’s leadership team isaware of the initial prospects of the newhire. That heightened awareness doesn’tstop after someone is hired.
“All of our leaders are constantly beingtrained and being told that part of theirresponsibility is to search for those peoplewho have a passion for whatever they aredoing and to let human resources know, sowhen the next available position comes up,you can go to those people, depending onthe job and the responsibility,” he says.
Once you start a culture where you arelooking first to promote within, it starts tofeed on itself.
“Now, to be honest, it’s a very difficulttask for them to do,” he says. “Let’s say it’sa sales leader in a particular store, and theyhave a great, great receptionist, she’s thebest, but she’s doing a hell of a job in there.Now sometimes, they try not to tell youthat they have a great person because theydon’t want to replace them, but they knowbetter. Probably all of them right now,especially the leaders in the stores, startedworking as a receptionist or in customerservice or as a salesperson, then becameleaders in the organization. They know thatthey were there one day.”
And for the rare person who might not beable to be that charitable, Capó makes surethere are other avenues in place for helpingpeople move up. Aside from counting onthe appearance of senior leaders in thestores, he says you should create systemsfor people to clearly spell out their interestin advancing their career.
“If someone’s really a shooting star, theywill shine so much that somebody else willnotice them,” he says. “The other thing isthat every single employee has a right tosend in for information or a document wehave available that says I request to workin this particular department — and thatdoesn’t mean that I’m going to give it tothem — but they always have that on file.Once you get that, we keep that on file andsay, ‘OK, we got this from you, what makesyou think you can be here instead?’ andthey tell you, ‘I can do this and that,’ and sothere is a mechanism there. If the leaderdoesn’t want to give them up, eventuallythere will be a way around it either by theemployee or by someone else.”
HOW TO REACH: El Dorado Furniture Corp.,www.eldoradofurniture.com
It didn’t take long after her arrival from North Carolina for Janice Bryant Howroyd to realize she wasn’t a natural fit in Southern California.
“When I came to California from the East Coast, I really was just so aware of how different I seemed to be than the people I was leading,” she says. “Mind you, I came to So Cal and I worked and moved around in the Beverly Hills and Hollywood environment, so I didn’t look like the people I was seeing; I didn’t speak the way they did.”
But one thing she did do just as well — and probably better — than her compatriots was come up with and act upon creative ideas. So while she was different, she was able to pose a question that was pretty important: So what?
“I was having this conversation with my mom, and she told me, ‘You’re really going to have to stay true to who you are and this adaptation has to occur from their part as well as yours if it’s going to fit,’” Howroyd says. “That means that I adopted a very firm position in making sure there was mutual enjoyment in how I lived in an environment, not getting away from who I am in order to succeed. And I believe that companies should recognize that their people can have that same enjoyment, while naturally following the law of the land and the processes you have, and there’s still a lot of room for people to be themselves in your organization.”
There certainly is a place for those people at ACT 1 Group of Cos., the staffing, human resources and management solutions juggernaut founded by Howroyd more than 25 years ago.
Howroyd, who is also the company’s CEO, has grown the company up on those principles, laying down a foundation for a culture where people grow their careers at the company through creativity and educated risks. From that culture, the company has grown, mushrooming to 1,745 employees since late 2005 — a 42 percent increase — while growing at an average rate of 9.2 percent over the last five years.
Building that kind of culture isn’t easy. First, you have to set the tone and give employees the ability to make their own path. And you have to do all of this without completely obsessing over creating a homogeneous culture, instead realizing flexibility breeds growth.
Live your culture
The starting point to building your company culture is simple: It’s you. You have to let employees see your drive and passion to push growth through risk taking and personal growth in the field up close.
“When you put forth your vision, when you restate or redefine initiatives inside your organization, those shouldn’t just be an academic exercise that people are asked to perform to,” Howroyd says. “I find that the best leaders manage processes, but they lead people, and that requires you to know the people in order to build the business forward, and the flip side is the people need to know you. More of your organization’s culture is influenced by the interaction you have with people than it is just by you putting forth a brand initiative around a product or a service that you’re building.”
So how do you live a culture that encourages people to be creative and grow? Start with creating dialogue with people about personal and professional growth.
“The thing that I do on a personal level is I really do free people up to talk,” she says. “I don’t stick to yes-no questions; I don’t stick to questions. Sometimes I ask them their perspective, as much as they care to share, in areas outside of the immediate business or immediate job that they’re performing in my company and just get a balance on where they are in their lives. That enables me to not just value whether or not they’re able to contribute to my organization, but whether our organization can contribute to their growth, as well.
“That can be very important in a company that’s growing, and it’s something all leaders should be cognizant of — just because my company is growing, does that mean my employees are able to grow, too?”
Part of this process is understanding how to maximize your conversations with people to help them realize what they can do. For example, Howroyd likes to have conversations after someone has failed.
“Not only does this allow both the person and me to investigate for future growth how we avoid future failures, it also implants within their business DNA the truth that it’s all right to take business risks,” she says. “It’s very common for leaders to applaud people on their successes. I just think it’s of value as well to go out and talk to people when they experience failures, give them a pat on the back, and then make sure that the both of you explore how to avoid those future failures or turn those into future successes.” Again, this is just the work needed to set the tone at your organization, but going through the steps to build culture requires your legwork.
“As your company grows larger, you’re not always able to talk with every person at every moment,” Howroyd says. “But what I think does happen is by you being thoughtful and selective in talking with people where you can, the message moves forward throughout the organization and people come to understand this is a culture that embraces me being able to step forward and take and recognize thoughtful risks.”
Encourage employee evolution
In her conversations with people, Howroyd realizes that not everyone at ACT 1 is growing the way they would like. Her solution to that goes to the heart of creating a culture where people can grow and be creative: She looks for new roles that can satiate their needs while growing her company.
“Organizations hire accountants into accounting roles, and they do really well,” she says. “Those same people may take an interest in technology through the use of your business system and find themselves somewhere along their career better tracked to design your internal business solutions.
“Why keep them in an accounting environment that they’ve grown beyond? People can perform well in one job for many years and get the commensurate raises and pats on the back that come with that and not be truly happy, but they might be people who have integrity to the job. Listen out loud to them in their regular performance reviews and find out where else they want to grow in your organization. By all means, if the opportunity exists, give them the chance or create the chance. There’s nothing better than having people who grow through your organization than to help them to grow your organization forward.”
That listening process comes at ACT 1 in the form of quarterly evaluations for each employee, but there is also a need to do that on a more ad hoc basis. Whenever you’re working closely with an employee on a project, take the opportunity to see if a portion of that work, which may be outside of the person’s normal realm, tickles his or her fancy.
“We also have the opportunity to do evaluations through projects and initiatives that we work on in the organization, and that’s where the real listening happens,” Howroyd says. “During those quarterly performance reviews, you should take full advantage to see where they are growing and how they can grow. You also should understand that for the employee this means the light is aimed at their face and so their conversation, while honest, can also be somewhat reserved. When you’re working with people in team initiatives or special projects, you have a splendid opportunity to find out where they might like to perform or grow differently in your organization, and it’s a much freer environment and conversation for them.”
Howroyd’s example about the accountant who might want to build out your internal business solutions hits close to home for her. Her company has grown through technology solutions, and the people who built that were existing employees with an interest in adapting the company.
“We would not have achieved the growth we’ve had, nor would we be on the track for growth we’re currently in, if we’d not engaged technology in a very basic way to how we function as an organization,” she says.
Don’t kill your culture
When you want a certain kind of culture in your organization, it’s a delicate balancing act. If you push too hard for your culture, you may deny creativity by forcing people down one path. At ACT 1, Howroyd views a good culture as a book that everyone is working from. That means there are core elements to the plot everyone understands — the need to grow personally and professionally and the desire for creativity, for example — but people aren’t always reading it at the same speed or at the same time.
“I think that leaders need to appreciate the opportunity they have to promote an evergreen environment,” she says. “For me, that does-n’t mean keeping people on the same page, it means keeping them within the same book. So, region to region, my organization may be on different pages of the same book, but the important thing for me is that we are all following the same processes, we all have the same tools and we all are able to respond at the local customer level.” Basically, if you are able to set the tone for a creative culture and you see that your company is coming up with creative products, you can’t be too nitpicky if the leader of your financial group does-n’t have as lively of a leadership style as the head of your marketing group.
“In my organization, I truly don’t mind having different leadership styles exist,” Howroyd says. “One of the things I’ve found in 30 years of building my business is that even when we deal with large corporations, those companies will have different cultures and leadership styles not only from country to country but from business department to business department. ... So differences in leadership style doesn’t have to be an issue in my company; it can be something that is just a part of how we experience diversity.”
That isn’t denying the fact that there can be negative cultures, but if your cultural tenets are growth and creativity and you aren’t experiencing those things, you’ll know pretty quickly. On the occasions that that happens, Howroyd says you have to circle back with people and go over the book again. And that doesn’t mean you point the blame at them.
“I look first of all at their results,” she says. “Given that we hired theright people and we’ve resourced them well, the conversation becomes, ‘What do we need to do differently?’ not, ‘What’s wrong with you?’”
The approach of circling back to talk about your processes and straightforward goals, instead of focusing negative attention on one person, will encourage them to look for gaps rather than sulk.
“When you approach it that way, you have your direct reports more engaged in being researchers or equally engaged in being researchers as they are in being the information providers,” Howroyd says. “Their teams work better with them and every single time this will bring a better result than just going after people to find out what’s wrong with them.”
HOW TO REACH: ACT 1 Group of Cos., (800) 365-2281 or www.act1group.com