Mark G Scott
When all the dollars and cents were added up for 2012, cleverbridge’s revenue topped $363.5 million — and co-founder Craig Vodnik realized the company had come a long way from when he answered phone calls in his Chicago basement.
“I was also out prospecting for new leads and new business, so I would do that when I wasn’t answering the phone,” Vodnik says. “We didn’t have venture capital or angel investors, so we bootstrapped it ourselves.”
Cleverbridge is a full-service e-commerce provider for companies that sell software and software as a service.
“Cleverbridge was launched because my partners and I were working in this industry at a previous company in Cologne, Germany,” says Vodnik, who also serves as vice president of operations. “That company was acquired by the market leader. When that happened, we all looked at each other and said, ‘This isn’t what we want to do. We want to control our destiny, and we’d rather go start our own company.’”
The challenge for Vodnik in those early days was bigger than just having to work out of his own basement. It was the fact that he was the company’s only employee in the United States. The other co-founders, Christian Blume, Martin Trzaskalik and Peter Blunck, were all in Germany.
“As the volume, the number of things to do, the strategy discussions and features we wanted and the market all started picking up, my time was filling up fast,” Vodnik says. “I said, ‘I need some help to come in and answer the phones and take some of the randomness out of my day and make it more structured so those calls could be answered by someone else.’ I just couldn’t be interrupted all the time.”
What followed was a series of valuable lessons in team-building that enabled Vodnik to get the help he needed to grow the company to where it could sell its services to at least one person in every nation around the world, including Antarctica. Here’s a look at how he did it.
Focus on the opportunity
Vodnik needed to focus on strategic direction and growth issues and what actions he and his co-founders needed to take to build cleverbridge into the company they wanted it to be.
“I went to some of the universities around here and I started posting advertisements for part-time help for customer service because that was something I knew I could train somebody to do,” Vodnik says. “I knew I could push it off and theoretically, students would be interested in finding part-time work for $10 to $12 an hour.”
Vodnik sweetened the deal by focusing on the company’s international presence and the need for people with foreign language skills or technological expertise. This was a growing company and they would get a chance to apply their skills toward helping it expand in tangible ways.
“So I was hoping by finding people who were internationally focused or savvy, they would build more of a rapport with cleverbridge and possibly stay on down the road after they graduated,” Vodnik says. “That model really resonated with people.”
The lesson learned was that whether you’re a business on the ground floor like cleverbridge or an established multimillion dollar organization, you can gain a lot by engaging the people you hire in your efforts to grow the business. This is especially true of younger people who are just getting started in their careers.
“It’s about helping them understand where this can lead them and making it a mutually beneficial situation so that they realize there is something in it for them as well,” Vodnik says. “I can go across the board at cleverbridge and show you all these different people where we went in and said, ‘Let’s hire this young person and give them a chance. Let’s invest in them upfront, give them knowledge and spend time with them.’
“The benefit we’ve attained from a profitability perspective has probably been two or three times what we would have received from an equivalent person we got off the street who had five years of experience working someplace else.”
You get people who are willing to work for a smaller salary to gain valuable experience in the real world of business. At some point, if they really have the skills and help your business grow, you owe it to them to compensate them more appropriately or risk losing them to a competitor.
But you’ll earn a whole lot of valuable loyalty during those more difficult times.
“When the going gets rough, these people, if you’ve invested in them and treated them the right way, will give you the benefit of the doubt and choose to stay rather than go at the first sign of a storm,” Vodnik says. “You also get people that you can train the way you want them and that has a huge payoff in terms of efficiency. You’re not trying to break someone’s bad habits that may have formed somewhere else.”
Don’t wait to train
Flash forward a few years and cleverbridge was no longer a bootstrap operation working out of Vodnik’s basement. The company was now doubling its office space every two years and broadening its reach to additional clients. Vodnik recognized the need to become even more proactive about preparing employees for a steep growth curve.
“We created a structured training program within the organization so that anybody in the company — and this applies from customer service up to any senior manager — has the ability to take these classes,” Vodnik says.
“It’s a great way to develop internal talent so that we don’t have to compete with the market. We get to know the person before we actually put them in the position to make a value judgment about whether they will be the right fit for the team or not. It’s identifying skilled talent and training those people before we need to fill those positions.”
Vodnik began talking about the training opportunity a few months before the classes actually began. It was done in a repetitive fashion and the goal was to find the people who were really interested in learning and weed out the ones who didn’t have their hearts in it.
“We’ve sold it to people as something that is really going to benefit you,” Vodnik says. “This is something you would have to pay for if you went outside the company, and we’re offering it to you during the day while you’re already here.”
The people you choose to do the training will also go a long way toward determining its effectiveness.
“You want somebody who has some patience and can clearly explain things and do a lot of the pre-work of organizing materials in a very clear manner,” Vodnik says.
“What we see as a problem with a lot of training is people try to dive way too deep into something. If the person doing your training is a very verbose person, that generally isn’t going to be a good trainer. They’re going to be standing up there talking and not reading the audience to know if they are hitting the mark.”
Sharing the spotlight
The plan to focus on younger talent and groom future leaders in the company through in-house training has paid off in big ways for cleverbridge. The company has been profitable since 2007 and now has more than 220 employees.
One of the keys to its success is the continued engagement between leaders and employees.
“It’s very important for the leaders of the company to be up in front on a frequent basis,” Vodnik says. “Talk to the people. Talk about what’s important and talk about what’s going on, but don’t hog the spotlight. Make sure you’re allowing other people to share. Delegate that responsibility. Give other people who are the next line of management in the company the opportunity to talk so that they feel they are contributing and are seen the right way in the organization.”
If you have people who have something to say or contribute, but aren’t as comfortable being up in front of people, go up there with them.
“Some people aren’t as comfortable getting up in front of a whole group of people, especially on their own,” Vodnik says. “There are ways to work around that.”
The lesson is that successful companies keep their peoples’ best interests in mind and do what they can to help them grow along with the business.
“You treat them right and invest in them, and you’re going to see a much bigger payoff down the road,” Vodnik says. “You can’t do this model across the board with every single position. But if you’re growing for the long term, it’s a great way to go.” •
- Respect the energy of youth.
- Help your people develop.
- Find people who can listen.
The Vodnik File
Name: Craig Vodnik
Title: Co-founder and vice president of operations
Education: Bachelor’s degree in nuclear engineering, University of Illinois, Champaign.
How did you get into nuclear engineering? I was going after aerospace engineering. Because of the timing when I was going to school — the Cold War was ending — they were cutting the number of aerospace engineers they accepted into college. The cool part about nuclear was it was an advanced topic, but the class sizes were very small. It was like being at a small university, but with the benefits of a much larger university.
Who has had the biggest influence on you? My mom. I’m a lot like her. She started her own business and did what she had to do to get things done and make ends meet. She was a single mother of two boys. She worked very hard and didn’t let a lot of things bother her. A lot of that came through in me.
If you could speak with anyone from the past or present, with whom would you want to speak with? President Abraham Lincoln. I’ve always been very interested in history and in Lincoln. How did he get to the point where he said, ‘I’m ready to take the U.S. to war with itself in order to save the country.’ I just think that whole process of getting to that point had to be a gut-wrenching decision.
How to reach: cleverbridge, (312) 922-8693 or www.cleverbridge.com
It became so quiet, so fast, that you could have heard a pin drop in the conference room at Independence Blue Cross.
Daniel J. Hilferty had been talking to his team about health care reform and the ways it could impact the 7,472-employee health insurance provider in the near future.
“So I’m in the middle of giving my point, and I’m being forceful,” says Hilferty, the company’s president and CEO. “And Paul Tufano, our chief counsel says, ‘Dan, I disagree, and this is why.’ The whole room went silent. He articulated a point of view that when he was finished, I came to realize that my position was flawed, and he was right. I admitted it in front of the group, and we went with his position.”
After the meeting, Tufano approached Hilferty, unsure what his leader’s response would be to his words of disagreement during the meeting.
“As we’re walking out of the room, he says to me, ‘Are you OK with that?’” Hilferty says. “I said, ‘OK with it? I wanted to hug you. This is what we’re trying to build.’”
Hilferty was excited that his team was showing it wanted to help Independence Blue Cross prepare employees and customers for the changes coming to health care as part of the Affordable Care Act.
“We have a strategic goal of being recognized by 2016 as the best performing Blue and a magnet to partner with other Blues in all sorts of business,” Hilferty says. “The challenge is to put a strategy in place that our board of directors and our senior management can get excited about and rally behind.”
This wasn’t about politics for Hilferty. He simply wanted his people to be ready to respond to whatever changes were enacted. Still, while he is careful not to jump too deep into the political fray when it comes to health care reform, Hilferty is a firm believer that something needs to change with health care in the United States.
“If you look over the past decade, the cost of health care in this country is now 16 or 17 percent of the gross domestic product,” Hilferty says. “If the costs are left unchecked, they could be 20 to 25 percent of our GDP. And you have more than 50 million Americans uninsured. Those two statistics alone point to the need for change in our health care system.”
But it wasn’t Hilferty’s job to solve America’s health care problems. His focus needed to be on preparing Independence Blue Cross for whatever changes were on the way.
The Affordable Care Act, also known as Obamacare, had become a hot topic of conversation in 2010. Hilferty’s employees, however, needed to be able to do more than just talk about it at the water cooler. It was going to be their job to help customers adapt to the changes reform would bring to health care.
“We started a series of meetings throughout the company that educated us,” Hilferty says. “We had people who became experts and we brought in external experts who would educate us on what reform meant, what we needed to do to prepare for it and what the timelines were to get ready.
“We took all that, broke into subgroups and developed plans and resource allocation through budgeting to map out how we were going to prepare for reform.”
Organizations that effectively adapt to major changes are able to focus on three keys in their transition strategy. The first key relates to corporate culture.
The cultural aspect begins with leaders and their awareness that just because they are the leader, they are not blessed with the right answer for every question.
“We want a feeling within the meeting room and around the organization where everybody feels comfortable with being open,” Hilferty says. “This isn’t about any one of us. It’s about achieving what’s best for our customers. We’re a traditional top-down organization, and we had to make people, regardless of their position in the company, feel comfortable about respectfully disagreeing or offering a different point of view.”
The situation at the meeting between Hilferty and Tufano was a prime example of what Hilferty wanted to see.
“Is it a perfect science?” Hilferty says. “No. But we’ve realized we’re a stronger company because folks are willing to weigh in with divergent points of view. Even though they might not win the day, they tend to get lined up behind whatever the final solution is because they feel like they had a voice.”
You’ll give people that voice by stepping back a bit when it’s a topic you’re not as familiar with as your department experts are.
“You’re the leader in setting the vision, organizing the company and getting everybody to sign off on a strategic and financial plan,” Hilferty says. “I’m not an expert in human resources and certain areas that go around that. So it’s about listening to those who have that expertise, who have that training and who understand the dynamics related to personnel and human resources and understand how to effectively achieve the company’s goals. Be willing to listen.”
The other keys are discipline and communication.
“Be disciplined at making sure you are being honest with yourselves, with each other and with the team about where you are ahead of pace, where you’re having difficulty and where you are spending more than your allocated budget to do things,” Hilferty says. “Do that in a way that is open, isn’t critical and keeps the focus on accomplishing the overall goal.”
Be up front with people
As Independence Blue Cross moved into some of the operational changes that would need to be made to be ready for health care reform, it became clear that efficiency would be really important.
“The biggest issue for us as a health insurer is there are new taxes, primarily a premium tax that will cost us tens of millions of dollars a year in additional federal taxes,” Hilferty says. “One of the key things we focused on related to that was using technology to really get the real-time data we needed to work with providers, our members, doctors and other health care professionals. We needed to improve our processes through the use of technology. When you do that, it can have an impact on people.”
It’s that impact, especially when you start talking about achieving workplace efficiency, that can stir fears in employees. Hilferty did not shy away from that possible outcome, but he did offer a plan to help people caught in the middle of the transition.
The plan would begin with offering employees, whose position was eliminated, the training they needed to move into a new position within the family of companies that Independence Blue Cross belongs.
If that new opportunity was available through a company that Independence Blue Cross has agreed to partner with, an effort would be made to “rebadge” that employee to work at the other company.
“We’ll work with the new company and hopefully you can transition to work with them,” Hilferty says. “If at the end of the day, there isn’t a position you’re interested in and there’s not a rebadging opportunity, we want to have a comprehensive effort whether it’s in terms of a severance package or outsourcing professional services that would assist you to advance your career somewhere else.”
Don’t make the stress of change worse by trying to sugarcoat it or by hiding behind false promises that will never be kept. Be upfront.
“It’s not easy to do that,” Hilferty says. “But in order to be competitive and be a really effective organization, we needed to face those challenges and we’ll continue to need to face those challenges.”
Reduce your stress
With an issue as complex as health care reform, it’s easy to get lost in all the details, deadlines, facts and figures that come with it. You’ve got to make sure you and your people don’t work yourselves to the point of being unproductive on the job.
“You have to enjoy what you’re doing every day,” Hilferty says. “When your work is finished, go home and get refreshed. Turn your BlackBerry off. Focus on your friends, your community, your pet — whatever it might be. When you come back, you’ll be more refreshed and ready to tackle it. We’ve really worked hard over the past three years to build that culture.”
As employees at Independence Blue Cross await the next few months and years for the changes in health care reform and the Affordable Care Act, Hilferty says he’ll stay focused on letting the people on his team at the $10.5 billion health insurer do their jobs.
“I’ve always gone into a position believing that if you have the right culture and you allow people to bring their strengths to the surface and you encourage them to be part of the process using their strengths, people do things that they never thought were possible,” Hilferty says. ●
- Prepare for the job.
- Help people fit in.
- Avoid burnout.
The Hilferty File
Name: Daniel J. Hilferty
Title: President and CEO
Company: Independence Blue Cross
Born: Darby, Pa.
Education: Bachelor of science degree in accounting, Saint Joseph’s University, Philadelphia; master’s degree in public administration, American University, Washington, D.C.
What was your first job and what did you learn?
When I was 12, I was a dishwasher at the Chatterbox Restaurant in Ocean City, N.J. I learned early that if you work well with the waiters and waitresses and you are polite to people, your job gets done more effectively. We’re about collaboration and truly being a leader in health care innovation. This is all benefiting the organization.
Who has been the biggest influence on you?
There are two people; the first would be my mother. My father passed away when I was 3. I was the youngest of five. My mother raised and educated all five of us and instilled the value of hard work and sticking together and working together. The second is a man who I had the good fortune of working for. He was the president and CEO of Mercy Health System. His name was Plato Marinakos. He taught me the value of creative thinking and team building.
Who would you most like to meet and why?
I mentioned that my father passed away when I was 3. I would love the opportunity to sit down and have a beer with the guy and just understand what made him tick. It would just be fun for me to understand who this guy was.
How to reach: Independence Blue Cross, (800) 275-2583 or www.ibx.com
When Rupesh Shah saw headlines about companies cutting costs, staff and basically whatever they could to stay afloat, he wanted to take another course as the recession that began in 2008 tightened its grip on the American economy.
“Anyone can cut costs, and that’s probably the low-hanging fruit,” says Rupesh, co-president at M S International Inc. “But we view cost-cutting as a last resort. If everything else fails, let’s look at cost-cutting. We said, ‘Let’s take a hard look at our business. If we know the industry is contracting, how can we expand our addressable industry?’”
MSI is a distributor of countertop, flooring, wall tile and hardscaping products. The company of more than 900 employees manages 50 million square feet of inventory and has international purchasing offices in India, China, Turkey and Brazil.
Rupesh and his brother, fellow co-president Rajesh Shah, have taken the company that their parents founded in 1975 and have made it even stronger.
Now they needed to find a way to battle through this tough time and give their customers a reason to continue doing business with MSI.
“What else are our customers buying that we’re not selling them?” says Rupesh. “Are those industries we can get to? What are we losing to our competition and what can we do to regain that? What can we do to get more market share?
“We didn’t engage in layoffs — probably one of the few companies that did not do that. Instead, we started expanding our product line and started getting into new product lines where we could use our same sales force to sell the same set of customers.”
It’s not always an easy strategy to follow, especially when it goes against the grain of what everyone else seems to be doing.
“The outside pressures and priorities, both internally and outside, can take over if you’re not disciplined about it,” Rajesh says. “They can take over your thinking, and you can slip on the disciplines that made you good. You can easily fall into the simple and quick versus what may be a little more difficult, but longer term, and is the right thing to do.”
Set your course
Before the company embarked on this growth strategy, a meeting was convened with the management team to list the company’s options.
“We can aggressively do cost-cutting and downsize our business by 20 to 25 percent,” Rupesh says. But before the company did that, Rupesh presented an observation.
He posed the growth opportunities as he and his brother saw them and attempted to calculate what it might take to make them work.
“Let’s make some reasonable market share calculations,” Rupesh says. “How long will it take? Can we stomach it financially? Should we do it? It helped get our culture and all our management team to move in that direction. We had a series of meetings on it.”
Certainly there is emotion involved when you’re in the midst of a recession and jobs and business relationships are potentially hanging in the balance. But Rajesh says he and his brother focused more than ever on taking emotion out of the equation and trying to make decisions based on facts.
“With the downturn happening and business slowing down, we said we’re going to survive and thrive, but the only way it works is if we make data-driven decisions and prioritize quickly,” Rajesh says. “We don’t have infinite manpower, resources or investment dollars. So we have to use all these approaches to decide how we unleash those resources and use them, including their own time being one of the biggest resources that we had limits on.”
Once the decision was finalized to not make cuts, but to instead pursue data-driven growth opportunities, it was critical that everyone was on board to make it work.
“Failure is not an option,” Rupesh says. “Changing course is not an option. As a distributor, you have vendors, salespeople and customers. You’re creating a view that this is not optional — it’s mandatory.
“We start judging salespeople by how many new products or product lines they are selling. You look at it very analytically. It’s not just the sales. It’s why aren’t you selling porcelain? Why aren’t you selling quartz? Why aren’t you selling wall tile? Get them to feel the pressure of it.”
One of the keys to being effective with limited resources is the ability to know what doesn’t work for your business.
“We tell all our managers your what-not-to-do list has to be longer than your what-to-do list,” Rajesh says. “It’s funny, but most people don’t believe in that. They always want to show what you did do. People don’t get objective credit for not doing something. We internally believe some of the best things we ever did are the things we didn’t do.”
If your business has products that had been big sellers but aren’t anymore, and you’re still trying to push them instead of promoting a new product that has a lot of potential, you’re asking for trouble.
“It’s a discipline change, and it’s not simple,” Rajesh says. “It’s a change of thinking. You need to make it a priority and continuously communicate it. You can’t just stand up and say, ‘We’re doing this. We’re done.’ It’s an ongoing process. And you can only do it by example. You can’t make decisions on gut instinct yourself, and then expect everyone else to do it with knowledge.”
The effort to drive results has to be constant to maintain momentum and reinforce the message that this is a very important thing you’re doing for your business.
“Let’s create a culture and an environment where everyone is thinking, ‘OK, right now, most customers are buying 15 to 20 percent of their product from us. Can we get them to buy 30 percent, and what will it take to do that?’” Rupesh says. “So we made a very strong push and created a culture. Everyone from 2008 to 2011, all they thought about was market share, market share, market share. How can we get more market share?”
MSI has positioned itself to succeed in the post-recession economy, but that doesn’t mean the evolution is over.
“You have one set of challenges to go from $40 million to $100 million in revenue,” Rupesh says, “another set to go from $100 million to $250 million and a third set to go from $250 million to $500 million. And now we’re looking at what it’s going to take to get us to $1 billion. That’s kind of the next major milestone for us.”
Just as it was in recovering from the recession, the makeup and attitude of MSI’s employees will be crucial in determining whether the company reaches that ambitious milestone.
“With our current set of employees, the majority of them have done a great job adapting,” Rupesh says. “So first, we look internally and say, ‘For the changes that need to take place, what skill sets do we have to have?’ Where there are gaps, we look to the outside.”
And while they want people who have experienced success, they also want employees who have experience setting a goal and working hard to achieve it.
“We’re very cautious and wary of hiring people who have just been in large organizations,” Rupesh says. “They probably have tremendous experience, but they worked in an organization that was already set up for what we want to get to. Ideally, we’re looking for people with transitional experience.”
The goal is to find people, either within your current ranks or externally, who can continue to identify those new opportunities and help the company take steps to better serve its customers.
“How are they going about solving problems?” Rajesh says. “Make sure when you interview or you’re promoting from within or reviewing within, that you’re grading on that question. How do you solve problems?”
The ability to solve problems and process data to make smarter decisions is a key reason why MSI has grown as quickly as it has.
“In 10 years, we’ve grown tenfold,” Rajesh says. “I don’t think we would have taken the market share we have taken because we would have been correcting a lot of wrong decisions. Of course, a decision isn’t always right or wrong. It can also be the wrong priority. This is a lower priority thing, and if we had done the higher priority thing, it would have generated faster or better results.”
If you have concerns about the systems you have in place to manage your company and its potential growth curve, the best advice is not to wait to act.
“The longer you wait, the harder it becomes,” Rupesh says. “To do a change in systems when you have several hundred employees is a lot more challenging than when you have 30 employees. As you think about any company’s transition, think first and foremost if you have the systems in place. If you don’t, how are you going to put them in place?” ●
- Agree to a plan.
- Hold your team accountable.
- Keep your eye on the future.
The Shah Files
Names: Rajesh Shah and Rupesh Shah
Company: M S International Inc.
Born: Fort Wayne, Ind.
Education: Finance and accounting degree, Wharton School of the University of Pennsylvania.
Who has been the biggest influence on you? My parents, Manu and Rika Shah. They always taught us to not be afraid to do things in life just because it’s risky.
What one person, past or present, would you most like to meet?
I actually wrote my college entrance essay on this. Wile E. Coyote, the cartoon character. No matter what he goes through, he just gets up the next morning and keeps trying it again. I would just love to talk to him. ‘You fail every time. What makes you get up and want to try again?’
Education: Bachelor of science in economics with a focus on finance and strategic management, Wharton School of the University of Pennsylvania.
Who has been the biggest influence on you?
It would have to be my parents. One thing my father did which has been very helpful to my brother and me is when we started, he never took the approach, ‘I’m going to show you the way to do things. This is what you’re going to do.’ He gave us a lot of autonomy to try things, and he provided a lot of support in those endeavors.
What one person, past or present, would you most like to meet?
I really admire Steve Jobs. He came to an industry and revolutionized it. I’ve read his book, and what I still don’t understand is how does someone like that have the vision he had and feel so passionate about it and execute on it.
How to reach: M S International Inc., (714) 685-7500 or www.msistone.com
Before Amit Kleinberger came to the United States and helped launch Menchie’s Frozen Yogurt, he was a member of the Israeli military. He graduated from commanders and sergeants school, served as a sergeant in Israel’s armed forces and was a member of an infantry combat unit.
“It shaped me more than anything,” Kleinberger says. “In combat, there are tough situations. When you tell someone, ‘This is what we’re going to do,’ they are risking their lives. It’s absolutely not going to work if you think they’re going to do what you tell them to do simply because you’re the ranking authority at the time.
“In times of combat, people will fight for their lives and do what they need to do to survive.”
Kleinberger sought to earn the loyalty of the people in his charge by being someone that they could believe in and trust, even in the direst circumstances.
“You have to be the person they want to follow,” Kleinberger says. “It’s about the values, the culture and the way you treat them. You have to be the kind of person who they feel is a role model, someone they can learn from. But you also have to be competent. You can’t just be the nicest person in the world. You have to know your stuff. If you’re not competent, they are not going to follow.”
That philosophy served him well in his military service and it has helped him be successful in a number of business ventures — one gland slam of which is Menchie’s, which opened in 2007 and launched as a franchise company in 2008.
The company now has 288 stores in 17 countries with another 300 stores in development. Annual revenue is about $143 million and Kleinberger, the company’s CEO, credits a culture that gives employees a sense of pride and ownership in everything that they do.
“Every good leader can see if their people are inspired and subscribed to the mission or if they are just there to do a job,” Kleinberger says. “Any leader can see when they lead someone if that person is doing it with their heart. The writing should be on the wall.”
Here’s a look at how Kleinberger finds people who believe in his leadership style and helps them become an integral part of the Menchie’s family.
Get the right people
Kleinberger describes his schedule as “liquid.” He tries to plan things out as far as two months ahead of time, and it’s not always easy to find an opening for a new appointment. But when it comes to his employees and their needs, they never have to wait to get a piece of his time.
“Even though I have things scheduled, my team comes first,” Kleinberger says. “If they need me for something, everything will be on hold, and I’ll be there for them. Everything else waits.”
This commitment to culture begins during the hiring process. It’s not unusual to have dozens of interviews to fill a single open position.
“I will take anywhere from 100 to 200 applications per position and from those, we will narrow it down to one hire,” Kleinberger says. “We’re really picky when it comes to getting the right people.”
He wants people who have skills, but more importantly, he wants people who bring the attitude that he is looking for to become part of the team.
“The skill sets are easy to identify,” Kleinberger says. “People have credentials. The harder thing is for most people who are not successful; it’s not because of their skills. It’s because they don’t have the right approach to what they do. That’s what ends most relationships in business.”
Kleinberger says he doesn’t want people who just want to sell as much as they can at their store, and he’s not looking for people who see Menchie’s as a stepping-stone to bigger and better things.
“Growth is not an objective,” Kleinberger says. “It’s a result. You’re not going to grow because you want to grow. You’re going to grow as a result of doing the right thing at the right time for the right person. It’s the same thing when I hire people. If they’re here because they just want to grow and that’s their objective, it’s not going to work.
“If their objective is to bring good to the world and to my company and to make people smile and to work as a team, if all those things are their objectives, the result is inevitable. They are going to succeed no matter what.”
Those who try to marginalize the importance of culture in the workplace, says Kleinberger, do so at their own peril.
“Nothing can happen with a wrong culture,” Kleinberger says. “Nothing will happen. The culture is what will define the performance of your company.”
Assembling a team of loyal employees is only the first step, of course, in achieving those great results. You bring in people and talk to them about being a valued member of your team. You need to follow that up with opportunities for them to provide that value.
“Empowerment is critical,” Kleinberger says. “If you bring people in, let them do what they need to do and empower them to the point where it’s even taking a risk. If you bring someone in to take care of a specific role or job function, let them run with it.”
Kleinberger cites his vice president of marketing as a prime example of the value of empowerment.
“There’s a senior executive that I hired and she’s an experienced lady,” Kleinberger says. “But beyond that, I believe in who she is. She has the attitude and the skill set. Recently, we were on the verge of launching a few products that I was less involved with than I usually am. The message I gave to her was clear: If you believe it, and you’ve done your studies, and you think this will work, go for it. Make it happen.”
It can be tough as the CEO to let people take action when you’re not sure of all the variables that have led to the action. But just as you had to learn and be given a chance when you were climbing the ladder, your people need the same opportunity.
“It is a big risk because if these products come out and are not as successful as others, that can have a risk,” Kleinberger says. “But I’m confident in these products because I believe in her. I believe she did the right due diligence to arrive at the result we want.”
He believes that many people who leave a job don’t do it because they’ve grown to dislike the company.
“The most common reason people leave is mistreatment and micromanagement,” Kleinberger says. “Empower them. If they feel they can make big decisions and make an impact and make things happen, they will do that big time. The problem is most companies don’t give people that leeway. They micromanage them and don’t give them the ability and responsibility to do certain things.”
So what happens when something goes wrong?
“It’s part of business,” Kleinberger says. “Don’t fear making mistakes. The ones who don’t do anything don’t make mistakes. For the ones who do things, it’s part of business. I make mistakes every day. Understand it, assume responsibility, repair it and prevent it. Those are the most important phases of accountability.”
Focus on the best
On a recent Friday afternoon at Menchie’s corporate office, Kleinberger arranged for a food truck from In-N-Out Burger to swing by and serve lunch from noon to 4 p.m.
“It has nothing to do with growing the business, but it has everything to do with it because that’s culture,” Kleinberger says. “They get to spend the afternoon with their friends celebrating. That’s what I mean by culture. It’s about doing things that show the team that we care because we really do.”
These days, businesses are chasing every dollar to get ahead but you can’t forget the effort your employees put in to achieve those successes. And if you’re worrying too much about costs and not taking the time to show your appreciation, you could be headed for trouble.
The same is true for your willingness to regularly make investments in your business that will please your customers.
It’s one of the key reasons Kleinberger puts better ahead of cheaper and revenue before cost on his priority list. If you spend too much time worrying about what you’re spending, you’ll never grow.
“The first rule is better before cheaper,” Kleinberger says. “It’s always good to compete on key differentiators and key value propositions instead of on price and being a commodity. The second rule is revenue before cost. I prioritize increasing my revenue over reducing my cost. I watch my income, and then I watch my expense.”
When you show your commitment to the task and get your people excited about it too, good things will happen.
“You have to enroll and subscribe people into that mission statement,” Kleinberger says. “If you do it, they will be happy to jump in and assist to make it happen.” ●
- Get people who believe.
- Don’t fear mistakes.
- Invest in your business.
The Kleinberger File
Name: Amit Kleinberger
Title: CEO and founding partner
Company: Menchie’s Frozen Yogurt
Born: Jerusalem, Israel. Immediately after my birth, we moved to South Africa and I spent my childhood in Johannesburg. That’s where I spent the first phase of my life. The second phase was in Israel and the third phase was in Los Angeles.
Education: I started going to Santa Monica College, and I actually dropped out in the first semester. Business was calling. I got the opportunity to start my first business while I was in college and immediately when I started, that business took off. I decided to part ways with college and head straight into the business world.
Who has been the biggest influence on you?
One would be a leader in the military who was my first commander. He taught me a very simple thing: ‘People don’t do what you tell them to do. They do what they want to do.’ He really led by example and understood leadership.
The second person is my father. My father instilled in me what I believe is the culture piece of business. He is one of the kindest people I know who always taught me to love, respect and care for people. And I mean everyone. It doesn’t matter if we know them or not.
What one person, past or present, would you most like to meet?
Steve Jobs had the ability to see things much earlier before they actually happened. That is intriguing to me because I believe being cutting edge in business is not only important, it’s critical. His vision was so interesting. I would really love to understand his process for seeing the things he saw.
How to reach: Menchie’s Frozen Yogurt, (877) 696-3624 or www.menchies.com
Michael Romano thought about his company, his employees and his customers and couldn’t escape the idea that something needed to change. Unfortunately for Romano, it wasn’t clear what that change would look like.
“In my mind, I knew what the issue was, but I struggled with what to do about it,” Romano says. “I was focused more on short-term solutions because that’s generally what people try to do.”
Associated Material Handling Industries Inc. was launched in 1960 to provide customers with material handling equipment and services that would improve their warehouse operations. It became a successful business and steadily grew over the years. But 50 years later, times were different and so were the needs of the company’s customers.
“We needed to change the way we did business,” says Romano, president and CEO of the 375-employee company now known simply as Associated. “We had to change how we appeared to people and how they perceived us. If they perceived us to be very tactical and product-oriented, they would try to acquire goods and services at the least expensive price they could.
“But if they viewed us as a more strategic business partner and a trusted business adviser, they would be more willing to pay us fair prices for the value that we brought to them.”
Put simply, Romano didn’t just want to sell his customers a forklift to move a crate from here to there. He wanted to work with customers to develop effective strategies for the transportation, delivery and storage of those crates as well as other parts of the warehouse operations.
“We’re trying to utilize the experience and expertise we’ve built up through the years so our customers may take advantage of that by having us understand their business needs and talk in terms of the various solutions that might be available to meet those needs,” Romano says.
But before he could do any of that, Romano had to get it clear in his own mind just what needed to be done to successfully transform his business.
Be deliberate in your planning
So what was it Romano was seeing that had him feeling skeptical about the future of Associated? The big thing was that the company’s profits and margins were shrinking.
“It’s been a number of industry factors and forces that have been in play now for years,” Romano says. “They culminated in the last several years in significantly restricting margins and profitability. What that is doing is restricting our ability to invest in the future, to grow the business and continue to raise the bar in supporting our customers.
“It became a vicious spiral downward that if continued, if market compression and profitability compression continued, as a business, we would pretty much dry up in terms of our ability to serve our customers.”
Romano realized that a short-term fix wasn’t going to turn things around this time. He thought about the wealth of knowledge and expertise the company had and went to his management team with an idea to capitalize on it.
“It really starts with how employees view themselves and view us as a company and how they project that to our customers,” Romano says. “Senior management understood the concept, and we embarked on a companywide brand transformation program that we started about two years ago and are in the midst of right now.”
When he got the blessing of senior management, Romano began to think about the possibility of providing all these great warehouse solutions to customers and his imagination began to run wild.
“Initially we thought it was going to be more of ‘blow it out of the cannon, everybody is going to love it, we’ll run from there, and it will happen,’” Romano says. “But we realized there was a lot to accomplish.
“We had to break it down into discreet steps and create a path over time to get to where we wanted to get. Even before we introduced it, there was basic education about what is a brand. We brought all our employees together and said, ‘What is a brand? When we say we want to change our brand, what does that mean?’”
It became clear to Romano that like anything in life, you have to put time and effort into a plan of change if you want it to endure.
“Anything that results in something good — usually there is some hard work, some time and some effort involved,” Romano says.
The preliminary work and effort that goes into crafting your message and thinking about how you will convey it to your employees is critical to achieving success and earning support.
“When you present it to employees, you have one chance,” Romano says. “If they see you wavering or if you don’t have all the answers or they see you changing in midstride, they are not going to have the belief that the approach is a sound one.
“From the beginning I felt we had to do something and started to give it some thought,” he says. “It was about a year before it was thought out, conceptualized, put on paper, shared, refined and then communicated to employees.”
Provide a reason
One of the big things Romano was concerned about was the reaction of employees to such a major change when business seemed to be doing OK. Profits were down, but product was still going out.
“We realized we could continue to sell a lot of stuff,” Romano says. “But if we’re not making money selling that stuff, we’re going nowhere as a business. We had to get people who were very good at what they did and get them to change what they did. People are very reluctant to change.”
The company’s structure made it a little easier to sell that message. Employees at Associated earn money based on a share of the gross profit that they make when they make a sale.
“They had seen for the last four or five years that profitability was going down,” Romano says. “So the numbers were very personal to each of them.”
However you do it, you need to give employees a reason when you’re changing what they do.
“You can’t even get to changing habits until you convince them why the change is required,” Romano says. “That’s why we committed to the long haul because this is not something that is accomplished overnight.”
Keep an open mind
Armed with a strategy to change his company and having shown his employees why the change was needed, Romano and his team set out to make the transformation. But even at that stage, Romano believed the education process needed to continue for him as much as for his team.
“There’s a tendency for a strong-willed person like most CEOs to have this idea that they think is the best thing since sliced bread and then that’s all they hear,” Romano says. “That’s all they think about, ‘How am I going to make this happen?’ They do that without truly going out and asking a frontline sales guy, ‘What do you think about this?’”
Romano was lining up tools that would make it easier for employees to offer solutions and initiate conversations with customers about how Associated could do more than just provide them with warehouse products. He also needed to talk to his team members about what they would need to do their jobs.
“It starts with an idea that then needs to be refined and turned into more of a seed that can grow,” Romano says. “If you don’t put the right ideas in upfront, it’s not going to grow. Those ideas have to be a cross-functional set of ideas. They can’t just be from the CEO’s perspective.”
All that being said, Romano did have a lot to offer his employees.
“I’ve spent 33 years in this business, and I’ve done everything from sales to accounting to every aspect of dealer operation that we have,” Romano says. “It gives me more credibility and much more empathy and understanding with every single function.
“It’s not just me instructing a salesperson to go out and do it. I’ve sat in front of a customer. I know what they face. I know what kind of reaction they are going to get.”
So Romano worked with his employees on strategies to get customers excited about Associated’s new offerings. The result was 40 percent revenue growth from 2010 to 2012.
“It’s just how we lead and how we front-face the customer,” Romano says. “It’s all about our experience and expertise and how we can help them solve their business problems.”
A big part of the new way of doing things was the ability to reach higher up in a customer’s organization. Salespeople are usually tasked with buying a product and don’t have the authority to make decisions on strategy. So Romano’s sales team needed to be able to get a forum with those executives who are a little higher on the food chain.
“We’re going to lead them to water a little bit first and hopefully give them some confidence,” Romano says. “Once they start getting introduced to these people, they can go carry the ball themselves.”
- Get your ducks in a row.
- Explain why you’re changing.
- Be open to alterations.
The Romano File
Name: Michael Romano
Title: President and CEO
Born: Somerville, N.J.
Education: Bachelor of science degree in accounting, Villanova University. I’m a CPA.
Who has had the biggest influence on your life?
My father because of the strong work ethic he gave me and for trying to make sure I knew there was no substitution for hard work; my mother for getting me to believe I could accomplish anything I wanted to. So the combination of those lessons allowed me to maximize my opportunities.
Who would you most like to meet, past or present?
President Ronald Reagan. To me, he’s one of the more consummate renaissance men. He was at the top of his profession as an actor. He obviously made it to the top of his profession as a political person. He just seemed to have a lot of respect from the people he interfaced with.
Romano on changing your brand: If changing your brand is something that has now become urgent, that’s a problem. You’ve waited too long and chances are your business is beyond repair.
Romano on how you view your business: Put yourself in the mind of the customer. How could it be better? It’s all about the customer. If leaders consistently think of things through the eyes of the customer, they will continue to challenge the way they do business and go to market. If you’re only focused on how you do things as a business and how to improve it, you can very easily get caught behind the curve.
How to reach: Associated, (630) 588-8800 or www.associated-solutions.com
Sir Tim Berners-Lee recalls a time when computer users around the world were quite nervous about the power of Netscape.
“A lot of people thought, ‘Oh, wow, a clingy and controlling Web company. What do we do about it?’” says Berners-Lee, director of the World Wide Web Consortium (W3C) and inventor of the World Wide Web. “Then they weren’t worried about Netscape anymore. They were worried about Microsoft, and they worried about Microsoft for a long time. Then they woke up one day and said, ‘Wait, the browser is not the issue. It’s the search engines.’”
Today, it’s the social network that has people worried, says Berners-Lee. But whichever medium is in society’s crosshairs, he says the fear is very similar in each case.
“When you have a monopoly, it slows innovation,” Berners-Lee says. “It reduces competition, and it’s generally not good for the market. One of the most important things about the Web is it being an open platform. The ’Net is a neutral medium. I can connect and you can connect, and we can talk. That is really important to an open market and democracy.”
One of Berners-Lee’s primary missions with the W3C is to ensure the Web is being used to its full potential. But it is also to make sure it remains an independent entity so that everyone who wants to has the opportunity to tap into that potential.
“If you can start tweaking what people say or you can start intercepting their communications, it’s very powerful,” Berners-Lee says. “It’s the sort of power that if you give it to a corrupt government, you can give them the ability to stay in power forever. It’s healthy for us to not put the Internet directly under the control of the government, but to have a set of multi-secular organizations at arm’s length from government acting responsibly and taking many views.”
Still plenty of room to grow
Berners-Lee helped launch the World Wide Web Foundation in 2009 to bring the power of the Web to more people.
“Maybe now 25 or 30 percent of the world uses the Web,” Berners-Lee says. “That’s still a massive gap and a massive number of languages where there still isn’t a lot on the Web. There’s a lot of culture that isn’t represented and a lot of countries where they haven’t the backbone for a good Internet base.”
The foundation has designed and produced the Web Index, the world’s first multi-dimensional measure of the world’s growth, utility and impact on people and nations. It covers 61 developed and developing countries, incorporating indicators that assess the political, economic and social impact of the Web in that country.
“The higher level of the Web Index is looking at impact,” Berners-Lee says. “Is it really affecting the way people do politics? Is it really affecting the way you do education? Is it affecting health?”
The recent turmoil in Egypt was a wake-up call to many who are connected to the Internet, but have started to take its power for granted.
“They thought the Internet was like the air, that it would always be there,” Berners-Lee says. “And people started asking the question, ‘Who could turn off my Internet?’”
Fortunately, there are countless efforts underway from those in the technology industry not to restrict access, but to take the Web to even greater heights.
“The art is designing it to work with all kinds of devices because different customer segments are going to use different devices in different countries,” Berners-Lee says. “If you’re designing something new on the Web, you need to make sure it works on all devices.”
How to reach: World Wide Web Consortium, www.w3.org
The greatest challenge of opportunity is said to be the ability to take the next step and understand what it will take to maximize that opportunity and achieve growth. Amy Rosen knows the importance of that comprehension.
“The skill set of an entrepreneur involves understanding how to create a business,” says Rosen, president and CEO for the Network for Teaching Entrepreneurship (NFTE).
Andres Cardona, who grew up in a rough neighborhood in Miami, is one of the best examples of this entrepreneurial spirit.
“He was on the verge of dropping out of school because his mom had lost her job, and he had to help contribute to the household,” Rosen says.
Fortunately, Cardona had become involved with NFTE. His natural leadership skills, along with the knowledge he was gaining from NFTE, empowered him to do something that would not only help his family, but also other youngsters in Miami.
Cardona founded the Elite Basketball Academy, an organization that would help kids hone both their basketball and leadership skills. He began with one kid and was making 70 cents an hour. Now, he’s a CEO with more than 150 kids, a staff of employees and he’s making money. He’s enrolled at Florida International University studying finance while he runs his business and supports his mom.
“I’m sure it will be the first of many businesses he runs,” Rosen says. “This is just a kid who needed to have his eyes opened to opportunity and learn some basics about business.”
A great place to start
The mission of NFTE is to work with young people from low-income communities, such as Cardona, and engage them in a different vision of opportunity and success.
“It’s basically an entrepreneurship class where they actually go through the whole business-creation process,” Rosen says. “At the end, which really gets to our mission, we want kids to actually connect school with opportunity so they stay in school. Kids start learning how to multiply fractions because they are figuring out their personal return on investments in their new company. We want them to start much earlier thinking about their future.”
Rosen points to Cardona as an example of a youngster with a great gift. But in too many cases, with too many young people, those gifts go unrealized and the child becomes an adult with nowhere to go.
“We want them to have a vision of success and whether they become entrepreneurs and create their own businesses or bring to their jobs and their employers an entrepreneurial mindset. That’s going to give them a much better chance at success,” Rosen says.
The work being done by NFTE fits like a glove with EY’s mission to drive entrepreneurialism in the business sector.
“Our cultures are so aligned around entrepreneurialism in general and we are all running competitions and promoting the notion that we need more entrepreneurs to solve problems,” Rosen says. “Now we have partners on every single one of our boards worldwide. They don’t have to be asked to do it. They really like doing it.”
Cardona was featured at the recent EY World Entrepreneur of the Year Award program in Monte Carlo. Other budding young leaders who have risen through NFTE also have been honored by EY.
“In every city where we have an operation, they feature our winning entrepreneurs,” Rosen says. “So the kids get an opportunity to network and see what success looks like and to go to the kinds of places they’ve never been and participate that way. And they get a sense of recognition for their work.”
Rosen says there’s nothing better than working with young people to prepare them for what lies ahead.
“If you’re going to give back, why not work with kids who need it the most and actually teach them and help them to be entrepreneurs,” Rosen says. “That’s what is going to grow our economy and create stability.”
How to reach: Network for Teaching Entrepreneurship, (212) 232-3333 or www.nfte.com
Michael O’Neill doesn’t focus much on how hard his employees work each day because that’s not what he pays people to do at Preferred Sands LLC.
“What you get paid to do is to get results,” says O’Neill, founder and CEO at the 526-employee frac sand and proppant company. Frac sand is crush-resistant sand of a specific size that is used by the petroleum industry in the hydraulic fracturing process.
“People become wanderers,” O’Neill says. “You get people who work very hard and very smart, but they wander into other peoples’ areas in the company instead of focusing on where they are strong and what they need to get done. You have to keep getting them back to focus on their goals.”
It’s a tough problem because on the surface, it seems like what every leader would want: A group of employees pushing themselves as hard as they can for their employer. Employees are coming in early, leaving late and even taking work home at night, oblivious to the idea that it doesn’t have to be that way.
“You need extensive metrics in every area to help them focus,” O’Neill says. “Otherwise, conscientious people will be so dedicated to the company that they will work themselves to death because they have not been given good direction to realize they don’t have to do all the things that they are doing.
“You get lots of metrics and you pull these people in and say, ‘Look, I know you’re working hard. But I don’t know why you’re doing these five things that don’t deliver value. I’d rather you focus on this one thing and go home to your family.”
O’Neill has taken the time to build a culture that focuses on generating results, and it’s led to a business that generated $500 million in revenue in 2013. The key to that success is how he and his leadership team keep people focused on doing their jobs through metrics and to make the tough decisions when they need to be made.
Stay on top of your metrics
The effort to stay on target begins at the top at Preferred Sands. O’Neill meets with his leadership team every Monday and a regular topic is how the company is performing against its metrics.
“How are we doing well? How are we not doing well?” O’Neill says. “So the metrics say we’re not doing well in this area. You drill down and say why are we not doing well? Maybe we made some bad decisions on best in class. Maybe we haven’t made some tough decisions. Maybe we aren’t delivering value relative to the marketplace.”
It’s a systematic look back at all the metrics the company has set up such as the value of the company’s product, the conversion rate of sales calls and number of calls being made.
“You just walk through those metrics one at a time,” O’Neill says. “Are we collecting our bills? Do we have a company in trouble? You just drill down and peel back the onion and go through all those things. When you do that, you find some department isn’t functioning right.”
In this scenario, it turns out a department is being asked to do too many things at one time and important items are being missed. Here, it’s not your team’s fault because they were doing what they were told. Now it’s your responsibility to address the issue and live up to your belief in the value of working on the right job, not just working hard.
“You have competent people and they are working on these three things and maybe we did talk about that, but I didn’t realize as a CEO that we didn’t have the bandwidth to do that,” O’Neill says. “So that’s why you have those meetings. ‘My mistake, let’s drop that from the priority list and see if you guys can’t get this to work and let’s review it again next Monday.’”
When you focus solely on working hard, the result is a burned-out work force. When you focus on doing work that delivers value to your customer and earns revenue for your business, you have a stronger business.
“If my business is down, if we’re having problems, the first question I ask is are we delivering value for the customer?” O’Neill says. “If we’re delivering value for the customer, let’s double down because we’ll make a profit on that. If we’re not delivering value to the customer, then it’s the sunk cost theory. I don’t care what you spent on it, move on, drop it. You’re not delivering value. You’re just trying to push water up a hill.”
Make people delegate
One of the keys to having an efficient work force that stays on target with its metrics is having a good team of managers that can effectively guide their direct reports. They can encourage the people who are appropriately focused and steer back the ones who are veering off or spending too much time on other things.
“The two things managers tend to lack the most is the ability to make a tough decision quickly and the ability to delegate and insist the person they delegate to does their job,” O’Neill says. “What they typically do is they delegate to somebody and if he or she is too weak, they step down and start doing the work for him or her. It’s a huge leadership weakness, and we see it all the time.”
Just as you need to regularly look at your company’s metrics, you also need to spend a consistent amount of time developing the leaders in your organization.
“I always want to make sure the person we’re hiring could be the next CEO of this company or one of our other companies,” O’Neill says. “I tell them that, at any level. You could be and if you want to be and you’re driven to be the next CEO; I want to make it clear to that person that the opportunity will be there.”
O’Neill tells people that one of the most important things they need to understand as they advance is that they can’t do everything and will not advance by trying to do everything.
“Successful people have high expectations of themselves and when they become managers, they have to learn how to take that same expectation and move it to the people below them,” O’Neill says. “I’m not going to rely on myself to do this anymore. I have to rely on my team and transfer that self-reliance over to them. Therefore, I have to hold to a very high standard those that I hire and those that I keep, and I have to develop them.”
It again comes back to the idea that it’s not about working hard. It’s about doing the right thing and staying focused on what your role is in the company. When your managers advance, they need to know there are certain things they can’t do anymore and need to delegate to their replacements.
“I know I can’t scale without my managers learning to delegate to other people,” O’Neill says. “Otherwise, they’re going to be working 20 hours a day getting worn out and wondering why they aren’t getting any satisfaction.”
Dealing with conflict
Conflict avoidance is a big problem for many managers. Rather than deal with a problem head on, they try to avoid it or hope that it will just go away and resolve itself.
“So you identify a problem, but you don’t deal with it because you’re afraid that if you do, somebody is going to look bad,” O’Neill says. “So you let the problem fester.
“The reality is they would rather let the whole company go down and everybody gets run over by the bus because somebody in the organization is incapable of doing their job or is just not doing their job.”
This fear of confrontation can quickly become a major distraction from the goals your business has set forth.
“That now becomes your goal,” O’Neill says. “I don’t want to confront somebody. I don’t want someone to get hurt. What they don’t realize is you’re not going to hurt them. If they’re not in a good space, it’s not going to get any better by not addressing it. But it’s hard work. It takes stamina to always get up and say, ‘How do I refocus everybody on the goal?’”
When you promote this environment at a company level through weekly metrics meetings and you show that you’re willing to admit mistakes and make changes to keep everything on track, you encourage your managers to do the same.
“You run great organizations by being best in class in everything,” O’Neill says. “It’s how you define what is best in class and how you build a culture within your company of always looking for and relying on best in class that helps you get there.”
How to reach: Preferred Sands LLC, (610) 834-1969 or www.preferredsands.com
The O’Neill File
Name: Michael O’Neill
Title: Founder and CEO
Company: Preferred Sands LLC
Born: Merion, Pa.
Education: Bachelor’s degree in finance, Villanova University; law degree, Temple University School of Law.
What intrigues you about the law? It truly and thoroughly teaches you to problem solve. You’ve got a few hours to present your case and you’ve got to be thorough. That thoroughness of studying and outlining things and going down every avenue and checking the boxes, it’s really given me terrific insight toward problem-solving as it relates to business.
Who has had the biggest influence on your life? My parents. My mother was constantly focused on how to improve and how to get better. My father was a very hard worker and a very dysfunctional businessperson. So he was constantly scrambling in a dysfunctional world.
But no matter how bad it got, he had this ability to get up and go back to work the next day. He just had that stamina to always be the last man standing. No matter how bad it is, get up and go back the next day.
What one person would you really want to sit down and talk to and why? Peter the Great. He went around the world at a time when you couldn’t travel around the world looking for the best in class in everything, fashion, architecture, surgery, medicine, naval and army construction, commerce. He was unbelievable in his pursuit to find the best in everything and bring it back to Russia and bring that country into the present state at the time. You just wonder what made somebody so incredibly driven to do that.
Track your metrics.
Empower your employees, then let go.
Don’t fear problems. Face them head-on.
When Parsa Rohani left Microsoft in 2000 to start his own business as a technology partner to Microsoft, he had some clear goals in mind of what he wanted to build.
Rohani saw opportunity in the advent of the Microsoft.net platform and joining with co-founders Tim Marshall and Anthony Ferry, he set out to build a company that could capitalize on it.
Neudesic LLC was soon a success, becoming profitable in 2004. But as the company began to really take off and grow — with more customers, more employees and more locations — the focus began to drift. Neudesic has about 550 employees overall, with 390 in the United States and 160 in India.
“I was talking to my partners and even though we knew what our values were and we had an idea of what our vision and mission for the company was, maybe that vision and mission was not shared across our offices,” Rohani says.
“Although we are headquartered in Irvine, we have offices across the country. One of the things we felt was lacking was our value proposition and our mission. The idea of who we were as a company was getting diluted the further you went away from Irvine.”
Neudesic was still achieving profitability when many companies were scrambling as the global recession of 2008 hit, but it wasn’t growing as quickly. Rohani realized that if he wanted the growth to continue, he and his employees would have to take a few steps back and get refocused on what it was all about.
“The things you do when you’re a five-man company versus a 500-person company, there are some similarities,” Rohani says. “But there are also some significant differences in terms of how you operate the business, what you look for and how you train and educate your people. Fundamentally, it starts with you as the leader.”
In other words, your employees are probably not going to come to you and say, ‘Hey, we’ve lost sight of our values. We need to do something about it.’
“You are the first one who needs to change,” Rohani says. “If you don’t change and you expect everybody who works for you or reports to you to adjust to the new realities of business, then it’s going to be an utter failure.”
Seeking to avoid that fate, Rohani decided it was time that he and a group of his leaders get away and get refocused on the company’s core principles.
Do the groundwork
It’s easy to talk about getting away from the day-to-day routine of your business to talk about big-picture issues. The key to making it work is to have a plan for what to do when you get away.
“You have to have a purpose for what you’re doing and you have to work to engage the leadership of the company,” Rohani says. “Not just a few, but you have to engage a pretty good cross-section of your company to be part of it and understand why you’re doing it so it doesn’t just seem like busy work. It is the purpose of the company.
“If you don’t have the time to do it, in my view, over time you’ll become irrelevant. If you’re always tactical and you never take the time to look at the strategic value of your company, then it’s only a matter of time before you’ll be irrelevant.”
In 2010, which is when this process began, Neudesic had about 300 employees. So Rohani wanted to build a team of about 20 employees to take part in this off-site workshop to refocus the company’s mission, vision and values.
“What you want first and foremost is people who are passionate,” Rohani says. “Who are your most passionate people about a particular topic or about your business? Another group of people I would strongly consider are the ones that are most interactive about how to make the systems or the company better. People who are always OK with everything that you do may not be the best choice to figure out how to prepare your company for change.”
Once the team is chosen, your job quickly shifts back to purpose. You can’t wait until you get to the off-site meeting to start discussing the key points.
“About 60 days before the off-site, we started a collaboration effort across the company with these 21 people,” Rohani says. “We put in a variety of topics to be discussed and we did a lot of pre-work remotely, as time allowed, to prepare us for the off-site.”
Challenge your people
As the discussion began at the off-site meeting about what values were most important to Neudesic and how those values fit into the company’s mission and vision, Rohani was full of questions.
“My role was to facilitate and ask questions and challenge people on their ideas and thoughts,” Rohani says. “I did not propose a set of values and say, ‘OK, these are the 10 values I think are important. Let’s vote.’ I was an active participant.
“When you ask people the right questions, people who are passionate and smart, they tend to find the right answers. When you help them find the right answers, they own the whole thing instead of if you gave them the answer. Then you own it and it’s not theirs.”
The 21 people who were part of the off-site meeting were divided into teams, and each group was given the task of choosing five values on its own. With more than 20 possibilities, the list was eventually whittled down to five: passion, discipline, innovation, teamwork and integrity.
“So you take the first letter of each of our values and it’s PDITI,” Rohani says. “We looked at it and said, ‘If you’ve got these five, what else do you need?’ At the end of the day, there was consensus that all 20 some odd values that had been presented by the teams were represented by these five.
“Quality was one of the values that was out there. If you’re passionate, disciplined and you work in teams and you have innovation, quality is part of that. So do you call it out separately on its own? You can’t have quality without discipline.”
It was a smooth process for Neudesic, but there was some give and take to arrive at the final five values. That’s good. You should be concerned if you get people together and don’t have a little conflict in the process.
“If people aren’t engaged and challenging and asking the questions, they are basically conformists,” Rohani says. “They are not telling you everything that is in their head. Either you have a problem as a leader engaging these folks or you have the wrong people. The first thing you look at is yourself. Are you providing the right forum? Are you encouraging the kind of participation that is needed?
“An organization is composed of many individuals. Those individuals collectively are smarter than any one leader. If as a leader, you fail to cultivate the collective wisdom that is in your organization, that’s your fault.”
Building on the momentum
With five core values in hand, the Neudesic team returned from its off-site meeting excited about its regained focus.
“Even though we’re a technology business, everyone needs to be focused on the fact that it’s not about technology,” Rohani says. “It’s about business. It’s about innovating for our clients using technology, but not using it for the sake of technology. That’s been key in almost every initiative that we’ve taken since then. We were too focused on technology, and now our focus isn’t just technology, but the ultimate value it delivers to the business.”
So what’s the key to maintaining the momentum that everybody feels coming out of a workshop? Rohani says the key is developing a series of objectives that can help guide everyone going forward.
“You have to define the short, medium and long-term objectives that you have,” Rohani says. “Around each objective, you need to establish a rhythm. What happens a lot of times, and it happens to us too, is sometimes you say, ‘Hey, this is a great idea. Let’s do it.’ Then you don’t establish a rhythm. You don’t rally around it and measure the progress for it in a rhythmic, regular fashion. So it just becomes another thing you tried that never worked out.”
The objectives laid out a formula and provided the rhythm to keep things moving.
It’s not always an easy thing to do to stop and reflect on things like values, mission and vision. But those leaders who think their time is better spent on other things, or that their business is going well already and doesn’t need to look at such things, ignore these components at their own peril.
“I read a quote from Jack Welch a long time ago,” Rohani says. “He said, ‘Change before you have to.’ So it goes back to the biggest challenge for a business, which for me is managing change. Not responding to change, but managing it. Changing before you have to.”
How to reach: Neudesic LLC, (800) 805-1805 or www.neudesic.com
The Rohani File
Name: Parsa Rohani
Title: Co-founder and CEO
Company: Neudesic LLC
Born: Montgomery, Ala.
Education: Electrical engineering degree, University of Southern California.
What was your first job and what did it teach you? I was a sales clerk at a department store called Bullock’s, which eventually got bought by Macy’s. It helped teach me that you need to value your people because they certainly didn’t value their sales clerks. I was still going to school, so it was a part-time job, but I worked hard. The register recorded how much you sold per hour, and I was the top guy. I sold more per hour than anyone else. Six months after I started, I went in to ask for a raise, and they raised me from $3.80 to $3.90 an hour.
Who has been the most influential person in your life? My father. I love my mother dearly, but I got a lot of the values I have from my father, like integrity. If you do the right thing, are always truthful and are honest with yourself and others, you’ll have nothing to worry about.
What person would you like to meet? I’ve met him, but I would say it would be Bill Gates. What I admire about him is his ability to change the world. First he created the largest most successful software company and made computers commonplace. Before Microsoft, computers weren’t so prolific. He created that.
What I really admire about the guy is now he has turned his focus and attention to changing the world through his foundation. If you look at most businessmen who are successful, that’s what they do. All they do is run their business. It’s a very unique individual that is able to do both.
Take time to refocus off-site.
Push your team for strong solutions.
Establish a rhythm.
Jon Congdon and Carl Daikeler found a captive audience of people eager to get in shape and lead healthier lives when they launched Beachbody LLC in 1998. The business began as a marketing company producing fitness programs for TV, but soon started creating its own fitness products.
“At the same time, we were building out our website and getting more traffic there,” says Congdon, the company’s president. “We got pretty good at marketing our own products on the Internet.”
But in the mid 2000s, Congdon and Daikeler began to grow more skeptical of their continued reliance on TV.
“There was always going to be a demand for fitness and weight-loss products,” Congdon says. “But the television marketing business was tempestuous … you had to keep creating new ads. We wanted to stabilize the business by creating a new distribution model, a new way to distribute our products.”
That new model was going to be called Team Beachbody, a multi-level marketing company where customers could become representatives of Beachbody and sell products while earning a percentage from the sales.
“They can also find other people who would also like to do that and have them join as part of the organization,” Congdon says. “So some of them make very good money. They make money by selling and they make money by finding other people who understand the business opportunity and sign on as a Beachbody coach. A lot of other companies call them distributors. We call them coaches.”
It seemed like a sensible venture, but it took more time to get it up and running than Congdon and Daikeler expected.
“When you announce the idea, it all sounds great,” Congdon says. “It was when it was taking a while to get things going that some of the leaders in the company were concerned. It wasn’t profitable as quickly as we wanted it to be.
“One side of the company was generating tens of millions of dollars in profit and the other was taking a fifth of that profit and absorbing it. When that goes on two years longer than you anticipated it to, there are some people who will say, ‘Hey, do we really want to be in this thing? Is it worth it?’”
The response from Congdon was blunt: It has to work.
“We benefit by having a network of people who are helping other people succeed using our product,” Congdon says. “So if we’re going to give people these products and help people get fit, if we don’t generate a network that helps them get fit, we’re not going to achieve our core mission, which is to help people achieve their goals and lead healthy and fulfilling lives.”
Make sure you get it right
As Team Beachbody was being developed, Congdon and Daikeler knew the platform needed a “hero product,” something that would lure people to want to be part of the community that they couldn’t get anywhere else.
That hero product ultimately became Shakeology, a line of nutritious shakes in different flavors that would help users achieve a variety of fitness goals.
“The network markets that product and gets people on that as one of the core tenets of what it means to get healthy as a member of that network,” Congdon says.
The problem is the time it took to identify Shakeology as the hero product that Team Beachbody needed.
“You’re not going to find many entrepreneurial people who are pessimists,” Congdon says. “But it always serves you well to understand what the pitfalls might be. In all honesty, one of the pitfalls that we probably underestimated was our in-depth understanding of what it took to run a successful network marketing company.
“We did the analysis and we knew where we wanted to go and we knew we needed a hero product. But it took us longer to get that hero product ready for market than we thought. So in hindsight, we might have started that network a year later than we did, when we knew we had the hero product lined up. We certainly didn’t make it easy on ourselves not having an immediate source of sales for our coaches.”
All the while, as Congdon and Daikeler were working hard to get Team Beachbody on its feet, they still had the direct side of the business that required their attention.
“We needed, as one of our core initiatives, to maintain our excellence on the direct side of the business and to continue investing there,” Congdon says. “But that also meant we needed to almost incrementally grow another business, so the investment was large.”
The key goal to keep in mind, whether you’re launching a new product for a new business or a new product for an existing business, is the importance of building a product that you can proudly stand behind.
“You need to make sure you’ve created a product that does what you say it does,” Congdon says. “Have a brand that you can stand by. If you have any doubt, if it’s not the best it can be, you’re going to have trouble. You’re going to have trouble anyway, every business does. But if your product isn’t everything it’s supposed to be and more, then when you hit those rough times, you’re really dead because you can’t stand by your product.”
Keep the future in view
One way that Congdon and Daikeler try to stay ahead of the curve when it comes to dealing with challenges is their approach to strategic planning.
“We basically go in and create a new three- to five-year plan in the last cycle of every plan,” Congdon says. “So we’re always rolling into a new plan. We don’t wait for the current plan to end. We’re always working on the next plan during the last phase of the current plan.”
The key thing with any strategic plan is to understand your resources, both human and financial, to execute on that plan and to make sure you are ready to move forward.
“Luckily, we were the kind of company that was doing well enough, we have always been able to finance our growth and investments out of our own profits, which is a luxury a lot of companies don’t have,” Congdon says. “As part of the plan, it should also be within your reach strategically and financially.”
A consultant can be an effective resource in helping you make an honest appraisal of your company’s ability to tackle a new initiative.
“I’m not always a huge advocate for consultants,” Congdon says. “But in this case, it was very helpful to have somebody who was very smart and who took the time to research what our company was so they didn’t come in completely cold. They can come in and with a fresh set of eyes, walk us through the process of creating a strategic plan that actually makes sense for the company creating it.”
A consultant can take that objective approach and make sure the organization agrees on what it does well and what good opportunities out there it could pursue.
“That’s not something a couple of co-founders can just take on and do in their spare time because co-founders who are running a company don’t have spare time,” Congdon says.
One thing that a consultant should not be doing is critiquing your idea.
“It’s not their job to tell you the idea is stupid,” Congdon says. “It’s their job to help you get agreement on what the company’s strengths and weaknesses are so that you realize that an idea is stupid.”
Stay focused on goals
As the effort to build Team Beachbody continued to move forward, Congdon and Daikeler relied on weekly team meetings to make sure they were still filling in the gaps that needed to be filled.
“Everybody always includes a list of things that are concerning them or that are in the way of them achieving their objectives,” Congdon says. “Until those things are cleared out of the way, we call those blockers. They remain on the list so we have to talk about them every Monday morning. As they get cleared off, we know we’ve eliminated another blocker.”
Today, Team Beachbody is a network of thousands of independent distributors that have helped grow the Beachbody brand. The company’s other products also continue to thrive, including such well-known brand names as P90X, Insanity, Hip Hop Abs and Brazil Butt Lift.
But the multi-level marketing business that launched in 2007 now has a database of 14 million people, has recruited more than 100,000 distributors and leverages $100 million a year in advertising.
Even with that success, both Congdon and Daikeler still see room to grow.
“The idea of having an army of brand evangelists out there was Carl’s way to hedge against what might be at some point a fading TV audience that really only wants to buy on the recommendation of a friend or a neighbor,” Congdon says.
“We’re still looking to nail that. We’re doing well with it, but if we were really nailing it, the coach network would be growing even more quickly than it is.”
How to reach: Beachbody LLC, (800) 998-1681 or www.beachbody.com
The Beachbody File
Names: Jon Congdon, Carl Daikeler
Titles: President, chairman and CEO
Company: Beachbody LLC
Congdon on Daikeler’s belief in the network plan:
Carl was the champion of the network being the thing that needed to change the company. The real key was that at the end of the day, we both truly believed that the way to grow our business was to stabilize our revenue base in a way that would generate value for the company and make sure we were around for a long time to help our customers. While we had doubts in how fast it was going and doubts in certain aspects of the model, we never doubted it was the right thing for us to try to do.
Why the network system works:
We had customers who were champions of our product that were out there telling everybody that they knew that they lost weight using our products and were getting 20, 30 and 40 people to buy the product for us.
Carl really wanted to create a way for them to be rewarded for doing that. He also remembered that when we first started, we had both done one of our first products and had used our own testimonials very effectively to sell that product.
So he thought there could be hundreds of thousands of micro-versions of that around the country. If people were using our product and succeeding, they could use their own success as the reason to get their friend or neighbor to buy something from us.
Don’t skimp on your product.
Test your plan.
Keep issues in sight.