Never sit in the middle at a dinner table with a large family or you’re going to spend the entire meal passing bowls to both sides. That’s just one of the things that Anne Belec learned growing up in Quebec as the fourth of six children.
Now, as president and CEO of Volvo Cars of North America LLC, Belec applies more life lessons when managing an even larger family of 351 employees. Among the lessons: Express ideas clearly and concisely, don’t cut others off when you should be listening, and assume a fair amount of the shared responsibilities.
Smart Business spoke with the personable executive about how best to become acquainted with your staff before applying some of these lessons in the workplace.
Know thy staff. You have to invest the time upfront to get to know the people, their styles and their strengths. There’s no shortcut for it.
When I went to work in Sweden, I was facing a different culture, and I was coming into a new company. One of the things that I implemented, I call them skip-level meetings. I’m not just talking to my direct reports; I go in the organization a level or two and bring in groups.
On a two-hour block of time, the full first hour was just setting up a situation where people talk about themselves. I would give them a make-believe situation like, ‘We’re on a desert island, and you can only bring one person and two of your favorite things. What would they be?’
I let people talk this way, and then I would stop and say, ‘What has this revealed about this person?’ and get everybody to start talking about their insights into this particular person.
It really speeds up getting to know the individual and establishing the trust and a connection so that when we then move to the business part of the discussion, there’s already a certain level of trust and comfort that is established.
When you lead a large group of people, it also helped me remember people’s names. ‘OK, this is the guy who collects trains. This is the person that would have brought Tiger Woods instead of his wife.’
I still do these skip-level meetings on a regular basis to gauge the level of happiness, some of the things that are bugging people in the organization that we can pick up on or things that are common nature and then address as a management team.
Prep your staff before meetings. The more prepared people can be before they actually get to the meeting, the more efficient the time spent.
(Provide more than) just an agenda. It’s trying to provide a little bit of texture, some questions, or, ‘Come prepared to discuss the following topics ...’
(If employees) know what we’re going to be discussing, and they have time to formulate the ideas in their minds, when you get into the meetings, they’re more organized in their thought process.
I demand that they come in prepared. If they believe enough in their point of view, then they will have done good research and provide some good arguments for it. ‘Why do you say that? Do you have facts? Do you have data that supports your point of view or your direction?’
For a manager, it is difficult to back off from the point of view that you had. I am willing to do that as long as a different direction is well supported.
If they come in and say, ‘I’ve done my homework. This is why we think it’s a better decision or it’s a better idea or whatnot,’ if you have a good discussion around it and, at the end of the day, there’s an argument that is stronger, let go of your own point of view.
Validate decisions by explaining the rationale you used to make them. When you do get to the end and you say, ‘This is going to be the decision, and this is the direction that we’re taking,’ explain why.
We always circle back and say, ‘OK, I know this was not all your points of view starting out, but this is where, as a team, we’re going to go. This is why we’re choosing this path. Walking out of here, we all have to agree that now the decision is made and that we all support it.’
It’s a learning process for all of the managers who may be responsible for a very specific discipline. When you hear out the thinking process or the argument that others bring to the party because of their different backgrounds or because of their different experiences, you have the ability to share. You’re developing the whole team through that process.
Set the boundaries when granting autonomy. Micromanagement undermines people’s capabilities. People tend to start relying on the fact that you’re going to be verifying and changing things and doing stuff. They have less ownership of what they are doing when you overmanage.
Trust and empowerment does-n’t mean you’re not going to check what’s going on. Blind trust can lead to a lot of surprises. It only works if you understand the boundaries.
Empowerment is not embraced at the same level by every employee. Some people like to be directed much more closely than others, and others like to have a lot more leeway in what they do.
HOW TO REACH: Volvo Cars of North America LLC, (800) 458-1552 or www.volvocars.us
The 2003 workers’ compensation (WC) reforms created an extremely competitive workers’ compensation market in California. Numerous new insurance carriers emerged on the scene and a fierce competition among them has been pushing the rates down to new, unprecedented levels. Many businesses enjoy rates as low as 50 percent of the prereform levels.
Business owners noticed the extremely competitive market and are actively shopping their workers’ compensation insurance for lower rates. There is a catch, however, says Elizabeth Lisek, CIC, a commercial insurance broker with Westland Insurance Brokers.
“While lowering the rates is extremely important for any business owner and should be taken seriously, there is a hidden factor that may affect the business’s long-term savings a lot more than just a lower rate. That factor, often misunderstood by business people, is called Experience Modification (X-MOD) and is calculated by the Workers’ Compensation Insurance Rating Bureau (WCIRB),” says Lisek. “In order to truly save money on the WC insurance for the long term, one needs to have a basic understanding of the X-MOD to make wise decisions about their WC insurance and be proactive in the business’ safety and accident prevention program.”
Smart Business spoke with Lisek about the role of Experience Modification in the workers’ compensation package and how business owners can take an active role in lowering workers’ compensation costs.
What is the Experience Modification (XMOD) factor?
The X-MOD is calculated from loss information that insurance companies are required to submit to the WCIRB on an annual basis. The WCIRB calculates an XMOD for each employer provided the business meets a required premium threshold to qualify for an X-MOD. The formula takes into account reported paid losses, claim loss reserves and payroll amounts. It uses data of the past three years, but the most recently completed policy year is excluded. For example, an X-MOD effective in 2007 would use policy data from the policies effective in 2003, 2004 and 2005. The data from the 2006 policy would not be used until the 2008 X-MOD, when the data from 2003 would drop off.
Why is the topic of Experience Modification often overlooked by business owners and how does X-MOD affect businesses’ workers’ compensation premium?
While employers commonly realize that a lower X-MOD is somehow a good thing, many don’t make the connection between this number and their premium costs. Let me illustrate the tremendous savings a business may utilize by keeping its X-MOD at a low level. Let’s assume that an unmodified premium is $100,000. An X-MOD of 100 would be neutral as the premium would still be $100,000. With an X-MOD of 1.25, the rate is surcharged by 25 percent (the rate used by the workers’ compensation carrier is now multiplied by 1.25). The new premium would be $125,000. On the other hand, if the X-MOD is .75, there is effectively a 25 percent discount applied, so the $100,000 premium would now become $75,000.
It’s easy to see the tremendous surcharge, or savings, realized by the business depending on its X-MOD; in this illustration, the difference between the two factors translated into the $50,000 difference in premium. Such savings are hard, if not impossible, to realize just by cutting the rate.
What can a business owner do to effectively lower the X-MOD?
As I mentioned earlier, the X-MOD looks at the past loss history of the business. An employer may become more sensitive to the safety issues by creating safety programs and even monetary incentives to reward accident free teams/workers. Being that the number reported to the WCIRB is not just paid claims, but also all the reserves, it is extremely important to monitor the claims and close them as soon as possible, as well as make sure that the amounts reserved are kept at a reasonable level. In addition, since the X-MOD is calculated based on data reported to the WCIRB by an employer’s past insurers, incorrect or incomplete information can cause incorrect X-MODs. It may be worthwhile for employers to review the X-MOD calculations to make sure they are complete and accurate.
Why is it important to choose the right insurance broker to obtain the long-term savings on the workers’ compensation insurance?
The right broker can make a huge difference in the final cost of the business’s WC insurance. The broker should monitor all the outstanding WC claims and make sure claims are closed as soon as possible. If a claim stays open, the broker needs to discuss the reserves with the adjusters. The right broker can be successful in getting the reserves lowered, as well as in closing the claims.
The right insurance broker should not only be able to find you the best rate among different carriers, but should choose the company that will handle your claims quickly and efficiently and should also stay involved in monitoring your claims on your behalf.
ELIZABETH LISEK, CIC, is a commercial insurance broker with Westland Insurance Brokers. Reach her at (949) 553-9700 or email@example.com.
Education: Northwestern University, master’s degree with a concentration in marketing; University of Illinois, bachelor’s degree, finance
What leaders do you admire the most, business or otherwise?
It’s tough to talk about modern business practices without talking about Jack Welch at GE. I have tremendous respect for him from a managerial and professional perspective. Roger Enrico who ran PepsiCo for a number of years was also very inspirational from a marketing and consumer innovation side.
And I have tremendous respect for Ronald Reagan, actually. He always kept an eye on the big picture and surrounded himself with really good people, many of whom were smarter than he was, and got the job done.
What has been the greatest lesson you’ve learned in business?
The thing to remember is that in the ashes of your most disappointing experience lies the seeds of your biggest future success. So the key is to take that what on the surface is a disappointing and frustrating outcome and learn from it. Learn every element that you can from that experience. So that the next time you see something that looks like that, you’re more than prepared to deal with it.
Going to court should never be taken lightly. Even if a company wins its case, litigation may still take a significant financial and equitable toll on a company.
“Litigation has become an unfortunate reality for modern businesses,” says John Mark Jennings, a partner with Shulman Hodges & Bastian LLP. “If a company is contemplating litigation, it needs to have the right attorney, the right culture, the right people and the right financial resources to pull it off. Preparing for litigation beforehand can make a big difference in the case and goes a long way toward keeping the company focused during the fight.”
Litigation is particularly difficult for companies that find themselves embroiled in legal proceedings for the first time.
“In every case, you have to protect and brace your company for what is to come,” he says.
Smart Business talked to Jennings about how a company can prepare for litigation.
How can an executive manage expectations before entering into litigation?
Executives must consider and plan for the worst-case scenario before deciding if litigation is prudent. Many executives feel a moral imperative to seek justice against someone or something that has damaged their company. But just because your company is right, does not mean that litigation is right for your company.
Litigation takes commitment by key personnel to actively participate in the process. The toll litigation has on corporate officers and administrators is often significant. It is often very surprising to executives that their companies are scrutinized thoroughly as the parties in the case strive to find documents and analyze financial data. An executive may wish to consider if the company can withstand the bright light that litigation often sheds on the company’s inner workings.
If a company is about to embark on litigation, it has to be prepared to revisit the past. Looking backward is something at which many executives are admittedly not very good. The company officers will need to prepare themselves for this intellectual paradigm shift [i.e., thinking about things that they are not accustomed to thinking about] and be intellectually, emotionally and financially prepared for the impact that litigation will have on the company.
Another point is that CEOs who are generally not accustomed to being told what to do have to let the lawyers do their job. Executives should ask their attorneys all the questions they need to ensure the corporation is in good hands, but should also feel comfortable letting them handle the case. This will help lessen the burden on the company’s executives.
Why is a litigation budget good for business?
It is important for executives to have a general understanding of what litigation will cost which means you have to know the whole process and what financial impact it will have on the company.
There are essentially two types of litigation budgets those that are specific to a particular piece of litigation and those that are used to plan for future litigation needs. If a company is proposing or anticipating litigation, one of its principals needs to sit down with the company’s attorneys to discuss the potential litigation costs and to develop a budget based upon how the attorney expects the case to proceed. That way, the executive will be better able to justify litigation expenses to the board of directors.
Also, internal litigation budgets may be necessary for companies that compete in particularly litigious industries. Companies that engage in aggressive intellectual property pursuits or other core products are also good candidates to establish a litigation budget.
Some companies have the added benefit of an in-house attorney to assist with the coordinating and overseeing the efforts of outside counsel. Companies that do not have that luxury are forced to rely on their counsel to provide monthly financial and progress reports on the case. That reporting should also include the anticipated fees and costs in the next reporting period.
If a company has used the same attorney for years, should it consider looking elsewhere when litigation arises?
Chief executives are naturally loyal people. Because of that otherwise admirable quality, they tend to turn to the same attorneys regardless of the nature of the particular issue facing the company. That practice can sometimes be harmful when litigation arises. This is particularly true for small companies. Labor law, business litigation and intellectual property disputes are wildly different fields and should be handled by attorneys who routinely handle those types of claims. It is critical for an executive to ensure that his or her go-to lawyer is up to the particular challenge at hand.
It is prudent for executives to use their go-to attorney as a filter for selecting litigation counsel for a particular case. If the future of your company is riding on the outcome of litigation, the selection of which attorney to use may be the single most important decision made in the case.
JOHN MARK JENNINGS is a partner with Shulman Hodges & Bastian LLP. Reach him at firstname.lastname@example.org or (949) 340-3400.
Trust is a cornerstone of any successful business, says Jackie Herr. “You have to be able to trust the leadership of a company because you’re impacting the lives of so many other people and what they do and how their career goes,” says the co-founder and CEO of Ignite Health.
A subsidiary of inVentiv Health Inc., Ignite is a full-service health care marketing agency that seeks to educate and empower chronically ill patients and their caregivers. Just as clients rely on the company for honest information, Herr says employees rely on their leaders to provide honest leadership.
“I don’t have all the answers, but I have a lot of really smart people working here who say these are the trends and this is where things are going,” Herr says. “We listen to them and employ that in our thinking of the business.”
Herr has guided her 90-employee company to revenue growth of about 30 percent each year since its founding in 2001.
Smart Business spoke with Herr about why it can’t just be about the money, developing trust and why she encourages employees to admit their mistakes and move on.
Q: What are the keys to building employee trust?
When people do talk to you, make sure you’re listening. If there is an action that they want, either make sure they understand that it’s an action that you’re going to be able to take or that it’s going to take some time. Be honest.
It gets back to the trust. People want to talk to you, and they will talk to you as long as they believe they are being heard. Whether or not you can act on what they are asking you to do, at least follow up and say, ‘Here’s what we can’t do, and this is why.’
Clearly communicate why you care. It can’t be just about the money. It can’t be just about shareholders. There has to be a greater vision. You have to empower and let people know why you care so much about the company.
If everyone knows that it’s just for the money and it’s not for anything else, you lose the passion in your business and you lose the dedication from your employees. You just lose a lot when money is the total focus.
Q: How do you encourage your employees to take an active role in the company?
You get to this level in an organization and unfortunately, you think because you’ve been at this level, that you pretty much know everything.
Every day I come to work, my guys teach me something new and I learn something new and I learn that listening is far greater than telling people, ‘Here is what you need to do.’ Part of it is that as a leader, you tend to get all the problems. That’s just part of this job. You tend to get, ‘Here’s what’s wrong.’
What we encourage our group to do is, it’s fine to have a problem, but at least have a couple of ideas for solutions to deal with those problems. If you come to us with those, it’s a much more positive conversation than just being stuck in, ‘This is a problem.’
You can’t solve everything because you don’t understand all the intricacies of every level within the company of what’s going on.
Q: How can you maximize employee performance?
We tend to be pretty hard on ourselves in terms of who is good at what.
We try and get people to find their own sweet spot. Find what you’re good at and be OK with that and maximize that particular thing you’re good at. We just have to make sure we help people identify their strengths.
That’s gotten much tougher as we’ve gotten bigger. When you’re in a start-up mode and you have four or five people, then you have 10 people, then you have 12 people, it’s not unusual to say, ‘I went to this presentation, and I totally stunk.’
But as the organization gets bigger, that’s a much tougher thing to do. Our senior staff is charged with trying to make sure that people know that there is an open, honest forum for them to say, ‘Here’s what happened. This didn’t work so well, and here’s what I can do better.’
Q: How do you deal with failure?
Admit it, learn from it and move on. We share successes, and we share failures where things didn’t work quite as well as they should have. It’s important to admit it. A lot of people have a tough time admitting failure. When you admit, learn from it and move on, it makes the whole organization stronger.
Know you can’t please everyone. Don’t be too hard on yourself, and never take yourself too seriously. There are plenty of people out there willing to tell you you’re not doing a great job. Celebrate the successes and enjoy it.
HOW TO REACH: Ignite Health, www.ignitehealth.com or (949) 861-3200
At lease renewal, you have the opportunity to negotiate rental rates and occupancy benefits. But if you don’t take a proactive approach and seek out expert knowledge, you will almost always forfeit valuable concessions.
“Landlords are well aware of their tenants’ lease expiration,” says Brian Bennett, senior vice president with CresaPartners in Orange County. “Generally, they prefer to address lease renewals about six to nine months before a lease is scheduled to expire. They also know that when tenants have fewer options to move, there is less time to execute that move. Thus tenants may forfeit leverage in the negotiations.”
Smart Business spoke with Bennett about how tenants can maximize their leverage and generate optimum results at lease renewal time through strategic planning and expert assistance.
Why is timing so critical in lease renewals?
Many factors affect the outcome of a renewal. This is not an overnight process. Tenants need to allow approximately 18 to 24 months of planning before lease negotiations. It takes time to analyze the relationship between the real estate and the business. Tenants also need ample opportunity to learn about and consider alternatives in case they cannot reach a mutually agreeable extension of their lease.
In today’s environment, occupants have experienced substantial rental increases from their last lease negotiation five or more years ago. Tenants may also want to consider purchase options that could reduce costs and lower facility expenses and take advantage of a growing surplus of space in the market. Another benefit of starting the process early is that tenants may be able to realize landlord concessions prior to their lease expiration. For example, a new, lower rental rate or free rent concession may begin immediately.
What should tenants try to achieve during lease renewal?
Tenants should be informed and should understand the motivations and desires of the landlord. Doing so will allow the tenant’s adviser to better position the tenant to negotiate more favorable terms. The objective should be an overall below-market effective cost. From the tenant’s perspective, the renewal should result in an economic outcome that is less costly than relocating. Renewal should also include a lower cost to the landlord than what it would cost to secure a new tenant. It is important to consider current market conditions and occupancy alternatives. Landlords are fully aware that there are inherent costs to them if their tenants choose to relocate. These costs include:
- Lost rent from unoccupied space
- Tenant improvement costs required by a new tenant
- Additional economic incentives and/or concessions required to secure a new tenant
A tenant should always consider current market trends and market concessions that could ultimately be calculated back into reduced cost. When tenants leverage their options, they can often achieve equal or more incentives than a new tenant would receive. Additionally, at the end of a long-term lease, tenants should negotiate space improvements. Whether improvements include major renovation or minor improvements, such as carpet replacement and painting, the cost should come at the landlord’s expense.
From the tenants’ perspective, the overall goal of a successful renewal is to eliminate as many increases in their real estate costs as possible while securing and maintaining the right environment necessary for efficient operation.
How can tenants avoid common pitfalls?
The biggest mistake tenants make is negotiating from a limited information and/or knowledge base. Circumstances and/or market conditions that impacted a negotiation three or five years ago are irrelevant today. Tenants should retain detailed information on their respective markets as well as appropriate strategic advice from which to create maximum leverage. Even when tenants know that relocating is not the best solution, a well-executed plan will create unexpected and significant concessions resulting in measurable economic savings.
Can companies represent themselves in this process?
Yes, of course they can. However, over the years fewer and fewer companies choose do so. Like the legal profession, high-end representation is key to realizing optimum results. It is no different in the real estate industry. Companies with more than 50 employees looking to realize maximum economic savings and mitigate facility-related risk should first interview and then retain a professional adviser that they are comfortable with and whose experience, focus and professional history aligns specifically to the companies’ stated objectives.
BRIAN BENNETT is senior vice president with CresaPartners LLC in Orange County. Reach him at (949) 706-6600 or email@example.com.
Born: Tallahassee, Fla., 1951
Education: Bachelor of building construction, University of Florida; master of business administration, Auburn University.
First job: I have always worked in construction. My very first job was digging ditches at $1.35 per hour. My first construction project after graduation was the Fairmont Hotel in Atlanta.
Person whom you admire most in business and why: I admire Sam Walton because of his big dreams, his hard work, his tremendous success and his ability to remain humble through it all.
What is your favorite thing about being a leader?
It gives me an enormous sense of accomplishment, as a leader, to see complicated construction projects get completed on time and on budget through the dedicated efforts of our project employee teams.
Emerging technologies in the banking sector, such as remote deposit capture services, enable companies to reduce costs while improving efficiencies.
The image capture solution allows businesses to scan checks at their office location and deposit them by transmitting an image file. By eliminating the need for delivery or mailing of paper items, transmitted deposits can enter the collection stream faster and with less effort, cost and risk than with traditional methods.
Customers taking advantage of this technology have longer processing hours as well as improved funds availability and deposit reporting all without leaving their office.
“Now is the ideal time to take advantage of the benefits that remote deposit capture has to offer,” says Joy Gilmer, senior vice president of treasury management for Comerica Bank’s Western Market. “As more and more banks are exchanging check images rather than paper checks, remote deposit capture puts a business in the right position to take advantage of the savings and convenience of image technology.”
Smart Business spoke with Gilmer about advances in banking technologies and the benefits that remote deposit capture provides to businesses.
How have advances in technology improved the ways that businesses can handle their banking needs?
Through technology, businesses are able to quickly communicate financial information to and from their financial institution. With the advent of remote deposit capture, companies are taking advantage of later deposit windows, better processing float, simplified deposit creation and better record-keeping.
How does the concept of remote deposit capture work?
The concept is simple. A scanner is installed at the company and customers access the Web-based application from their PC workstation or laptop. Checks are scanned and an electronic deposit ticket is created. Once the information is loaded into the deposit capture system, the information is transmitted to the bank and made available for deposit processing. Since it is data versus paper checks being delivered to the bank, processing/desk float and manual processing errors are reduced significantly. Remote deposit capture services have proven to be a significant value in disaster recovery plans. Recent fires in California, for example, caused road delays that impacted the ability to deliver paper checks to the bank. With remote deposit capture, there are no ties to commute-related issues.
In what ways can this function improve record-keeping?
Deposit information, including images of deposited checks and electronic deposit tickets, is stored and available for retrieval as needed. Having quick access to this information improves response time to customer inquiries and reduces research expense. The capture process gives a company the ability to update account receivables systems directly. Reports can be accessed from anywhere using the Internet.
How can utilizing remote deposit capture increase productivity while reducing costs?
Remote deposit capture enables a company to make deposits without the checks physically leaving the office, thus, reducing expense associated with time out of the office, courier services and/or third-party depository banks. Deposit preparation time is reduced as information is scanned versus keyed or written. With the recent enhancements in the marketplace to Web-based solutions, deposit capture functionality is improved even further. A company with multiple locations can review consolidated reports, perform research functions and approve transactions remotely from any location. A company can now utilize the convenience of browser-based remote deposit technology.
What role do you envision technology will play in the future for banking?
Technology will continue to play a significant role in the financial arena. The movement and management of financial transactions is a complex process. Timing of obtaining and reporting information is critical to the health of a business. Having the right systems in place to improve processes is necessary to the ever-changing needs of the financial community.
JOY GILMER is senior vice president of treasury management for Comerica Bank’s Western Market. For more information on deposit capture technology or Comerica Bank's Business Deposit Capture, you can reach her at (714) 435-3931 or firstname.lastname@example.org.
Observe then act. To be a great leader, you must first step back and assess the culture and the current state of your company before blindly applying your own experience, says Jim Cragg, president and chief operating officer of MegaPath Inc. Having spent his adolescence moving from country to country with his father, an executive with Pan American World Airways, Cragg speaks with some authority. Whether in Tokyo, Munich or London, he patiently immersed himself in the culture before becoming an active shaper of his surroundings. That approach has served him well at MegaPath, a 480-employee communications provider, where Cragg oversaw three successful mergers while leading the company to 2006 revenue of $160 million. Smart Business spoke with Cragg about communication styles, culture and why you have to invest in your employees.
Adapt your communication style. The definition of leadership is the ability to get people to willingly follow. We have [nearly] 500 employees, and they’re at different stages of their careers. You have to find a leadership style that addresses that stage in their career or that particular role that they play in the business.
The four quads of that leadership are: Telling. Some people do like to be told, ‘This is what you need to do,’ and, ‘This is how you do it.’
Selling. Some people like to be sold on an idea so that they feel more a part of the decisions.
Participating, which is a more participative leadership style.
And then delegating. Some people have all the get-up-and-go that they need. They just need to be given an assignment, and they’re off to the races.
It’s not overly transparent. To lead effectively, you have to have flexibility in how you communicate. You have to understand the group that you’re communicating to or the individual. You have to allow them the opportunities to talk and ask questions, and you have to give them a level of comfort that they can tell you what they think.
Validate change. We communicate that change is inevitable as we grow as a company. People have to see change as bringing a value. If you just zig and zag and zig and zag, they don’t perceive that as value. You have to validate on an ongoing basis.
It will be challenging at times. If we change, and it doesn’t work, we’ll acknowledge that we made a mistake. When you do change, if you make a mistake, that’s OK.
Keep adjusting the formula to really get customer satisfaction to the point it needs to be that the business grows.
Find a common theme. The culture is the company. You have to find very common themes in order to get a culture to change.
You can say things like, ‘You’ve got to be profitable. You’ve got to grow revenues.’ But that is kind of nebulous. People don’t see the financials necessarily in depth.
Our approach is to enable people to feel like they make a difference. The way that people can make a difference is with a cando, positive attitude about getting things done for customers.
You definitely have to lead by example. You have to be involved in the challenges of just about every aspect of the business to show that you’re willing to participate in getting through those challenges and hurdles in order to be successful. You have to stay engaged and close to some of the things that are being changed.
I think the real benefit is that you get through your projects in an agreed-upon time frame and you accomplish goals.
Show people they’re important. People have to feel like what they’re doing is important in order for them to feel like they’re participating in the success of the business. When they’re working for a company, they want to know that they’re making a difference.
There is a lot of recognition involved. There’s weekly recognition for jobs well done. I always respond to the job-well-done notes. Any time a sales rep wins a deal, I’m notified, and I acknowledge and thank them for that.
We have employee of the month, in which we recognize [employees] and give gift certificates. That is acknowledged on a companywide call. We acknowledge team performance, and we acknowledge salesperson of the month. There’s always the opportunity to give stock options, which we give to every employee in the company.
You have to continue to make sure that they recognize that what they are doing is an important piece of the business. If everybody feels that way, the endgame is happy customers.
Invest in your employees. If you’re asking your employees to deal with change and accelerate growth, you’re asking a lot of them. You’re asking them to make a difference and work very hard. That’s their investment in the company.
The company has a reciprocal investment that it has to put in place for the employee. We need to show employees that we’ll build company newsletters, and we’ll give them good benefit plans, and we will give them career-path opportunities and encourage them to look at internal postings. We’ve got a budget going into ’08 for a lot more training.
You need to make sure as executives that you acknowledge and have a reciprocal investment that at least matches the efforts that your employees are putting in.
Share success stories. That’s a common theme in our all-hands call. I will acknowledge individuals’ performances from our customers’ view.
Since I get out and meet a lot of our customers, I touch base with them, and I get very positive feedback on our employees. I pass that on either through e-mails or through acknowledgement on company calls. We’ve got a newsletter ... that will have a large part (about) employee recognition.
The benefits really are the culture. People want to know that they’re making a difference. They want to know that the customers like and appreciate our products. They want to know that we are successful as a company. And they want to know that they are growing as a businessperson.
HOW TO REACH: MegaPath Inc., (714) 327-2000 or www.megapath.com
When the door to competitive energy sales swung open in the most populous state in the union, there was every reason to believe that a company focused on selling electricity to consumers and businesses in the Golden State would succeed.
Commerce Energy Group Inc. was conceived and founded in 1997 following the passage of California’s energy deregulation plan, but the door of opportunity slammed shut following the energy crisis of 2000, the subsequent Enron debacle and when California’s energy deregulation policy was abruptly placed on hold.
Commerce Energy floundered for several years until Steven Boss joined the company in July 2005. As the new CEO, Boss was charged with repositioning the firm and finding the open windows to new business and new markets outside of California.
“The company was in a large state of disarray for a couple of years,” Boss says. “Without leadership, there was turmoil in the executive suite, and there was conflict between older and newer management in the firm. The employee base had become divided between the two management camps, and they were loyal to their hiring managers. The problem was really not hard to spot. Fortunately, there were many capable people on board they just suffered from a lack of direction.”
Unable to capitalize on the original opportunities afforded by the California marketplace, the firm was losing money. Boss would need to find new sources of revenue to produce a profit. However, increased sales alone would not fix all of Commerce Energy’s problems.
In order to get new business, he would need to make certain that in-house conditions would be conducive to attracting and nurturing customers and that he had a unified team behind him, ready to succeed with the challenges of building the business. While he worked on repositioning the firm’s sales and marketing efforts, Boss simultaneously worked on eliminating internal barriers to growth and replacing the current climate with a more open and customer-focused culture.
Achieving a unified culture
Getting his house in order didn’t require a lot of assessment as to what the root of the problem was.
“It was very clear to me that we had two individuals in control of the organization that were taking things in the wrong direction,” Boss says. “The problem was also acknowledged by the board. We needed to develop a new direction as an organization and a corporate culture designed around achieving maximum performance.”
Boss says that the employees were divided, and there was little communication or teamwork going on between the two groups. To alleviate the problem of divergent managerial direction in the organization, Boss says he terminated the two senior employees who represented the newer management camp.
“I prefer an environment where there’s a more open culture and a greater flow of information,” Boss says. “In order to achieve success, I think that you need to have more cooperation between the various functions. People had built silos around their functions, and as CEO, breaking down those barriers is very important because, otherwise, there’s no ownership, and people point fingers when something goes wrong.”
Boss says that the firm’s business was negatively impacted from management operating in silos. For example, at Commerce Energy, if the customer billing function runs in isolation without information supplied by the commercial sales unit, the knowledge transfer of customer-specific billing requirements won’t happen. That results in incorrect billing formats on customer invoices and late payments from large users.
For Commerce Energy, eliminating delayed customer payments is vital because under its business model, the firm purchases most of its energy 12 months in advance on the open market after a customer signs a contract for service. Then the customer is billed in monthly increments based upon their consumption. Because the firm finances the cost of the initial energy purchase, any delay in payment increases their finance costs and decreases margins.
Following the exit of the two senior managers, Boss says that his efforts to change the culture were actually enhanced by greater-than-anticipated staff turnover.
“In the year that followed, we had a considerable amount of staff turnover, around 50 percent, which was a positive thing in this case,” Boss says. “The people who stayed wanted a more open environment, greater cooperation and a free flow of information within the organization. Those that stayed were supportive of the environment we were trying to achieve.”
Setting the tone
As he continued his pursuit of a cultural shift, Boss says that he demonstrated the importance of making changes to the staff by setting the tone from the top of the organization and leading by example.
For instance, Boss initiated and maintains an open-door policy where anyone can offer feedback to him. While many CEOs give lip service to having an open door and an open ear to comments and new ideas, Boss says that he uses technology to open up the communication between himself and a wide array of constituents as a demonstration of his commitment to accessibility.
“We’ve developed an investor chat room that allows the investors to send e-mails to our board, and those communications are also shared with me, and it is monitored by the SEC, as well,” Boss says, “I can answer their questions, or they can also get feedback directly from the board.”
He also wants to hear comments from his customers. Boss says that at one time during an extended power outage in his own neighborhood, he attempted to phone the electric company to relay his frustrations over the situation to the utility’s management. To his amazement, he was advised that it wasn’t possible to get a message about service concerns to the company’s CEO. Now that he’s the CEO of an energy supplier, Boss develops his philosophies about CEO responsiveness from his own experiences as a customer.
“We’ve included a link on our Web site that allows anyone to send me a comment whether it’s a complaint or an ‘atta boy,’ and I read all of those,” Boss says.
As further validation that he has been successful in achieving a cultural shift within the organization, Boss says that a receptionist in the Dallas office recently identified a problem with an outsourced sales channel and brought the issue to the attention of the sales and marketing department. The situation was addressed, and, according to Boss, that’s exactly the way it should be.
“It’s important that individuals at any level in the organization can express a concern to management or to the CEO, so you need to be accessible,” Boss says. “I always think that a person can learn something from everyone, and you can’t learn unless you are listening.”
Boss says that when he arrived, the firm was still struggling to finish digesting a recent acquisition. But despite that recent influx of new business, the firm still had excess capacity that would allow for new customer acquisition without increasing infrastructure and costs.
His financial analysis further showed that Commerce Energy was close to breaking even, given the current overhead and revenue, so rather than reducing head count, which would leave the firm unable to handle additional organic and acquisition-based growth, he decided to focus on adding new customers.
In keeping with his open culture, he launched sales and marketing efforts to entice new business based on customer input, and then he developed superior customer service that would entice new customers to stay once they became users of the service.
“Our excess capacity makes it feasible for acquisitions, but inorganic growth is somewhat serendipitous, and you have to be careful not to overpay when you acquire new customers, especially when you are brokering a commodity,” Boss says. “When I do the analysis on some deals, I find that I could add a comparable number of new customers organically within six months, so doing that analysis is part of the litmus test when it comes to deciding if the acquisition makes sense.”
Boss uses demographic feedback for each marketing campaign to validate his build-or-buy decisions and to achieve cost-effectiveness with organic growth. He also uses the data to further hone his customer acquisition messages, tailoring radio campaigns to each individual market based upon customer feedback.
“One of the metrics that we monitor is our new customer acquisition cost, and we further break down the costs by each marketing campaign we run,” Boss says. “We constantly take surveys within our tele-sales group to see who’s paying attention to our ads. As a result of customer feedback, we decided to offer a line of green energy. At the end of the day, customers vote with their pocketbooks, and our survey information indicated that customers were open to paying more for green. We want to listen to our customers and give them as many choices as possible because that’s what differentiates us in the marketplace.”
Boss says that retaining customers is more cost-effective than constantly seeking new ones and customer churn is too expensive for a firm struggling to get their total customer count up to a level that will make Commerce Energy profitable.
He has also instituted new customer service metrics and processes to reduce customer loss. He measures service metrics such as the wait time before customers are able to speak with an agent, and he also believes in investing in customer service training for his agents. Boss says that agent responsiveness often dictates whether the customer will continue to purchase the service from Commerce Energy or move to a competitor, which is always a possibility, now that consumers have a choice about where they can buy their gas or electricity.
“We billed 164,000 customers last year, and we become profitable when we bill around 200,000 customers,” Boss says. “So it’s important that we strive to keep customer churn down as low as we can. We’ve invested in a new phone system for customer service as well as training for all of our agents, and we monitor all of our service metrics so we can be more responsive. Every organization I’ve ever been associated with has been customer-centric, and so for me, it’s just intuitive that it should be that way.”
The firm added 100,000 new customers last year, with a 10 percent increase in new customers coming during the fourth quarter. Fiscal 2006 net revenue for Commerce Energy was $247 million, and although the company’s bottom line for the full year was in the red, the firm earned a profit in the fourth quarter showing that things were headed in the right direction.
Boss says that effectively managing growth is still a challenge some days, and despite the improvements in the company, Commerce Energy is still a work in progress.
“It’s impossible for one individual in the organization to have complete control of everything,” Boss says. “You have to develop a culture and an ethic in the organization where the employees believe in the mission and want to accomplish it for you. As the CEO, you have to be a leader first and remember that every individual in the organization helps you in achieving your goals.”
HOW TO REACH: Commerce Energy, www.commerceenergy.com