Measures of the man Featured

8:00pm EDT October 26, 2007

When the annual MEDRAD Day of Caring comes up in the conversation, John Friel turns to his communications person and offers a suggestion.

“I think we need to juice it up a little bit,” says Friel, president and CEO of MEDRAD Inc., a medical products company. “It’s almost become kind of routine. I think we’ll need an extra push from me to remind everybody, get them pumped up.”

Last fall, half of MEDRAD’s employees — at a cost to the company of about $150,000 in payroll — took part in the annual charitable event, where volunteers offer their labor to perform tasks like refurbishing playgrounds and working in food banks and soup kitchens. It’s the kind of activity that Friel says has as much benefit for MEDRAD as it has for the charities it helps.

Earlier in the day, Friel spent time serving sandwiches to workers at MEDRAD’s new facility in Saxonburg, Pa., and he’s tidying up some last-minute details for a trip to New York. After a busy day, he’s still eager to talk about the value of an engaged and happy work force when it comes to customer satisfaction.

And he always makes sure that he expresses his view of his own role in the 1,700-employee company, whether at his monthly presentation at employee orientation or at a school career activity.

“The middle school has a career week, and they ask parents to come in and talk to the kids,” Friel says. “So they ask me to come in and talk about business. So I come in and tell them I’m a CEO and ask them what they think about that. Usually, one of the kids ends up saying something along the lines of, ‘That means you’re the big boss, and you get to tell everybody what to do, and wouldn’t that be cool.’

“I’m looking for them to say that because I tell them it really doesn’t work that way. The big boss is the customer. They don’t know anything about me, they don’t know anything about our nice, new facility here. They know the sales reps, they know the person talking to them on the phone. That’s who MEDRAD is to them. Then you get the folks who supply those people, the marketing people that figure out what the customers’ needs are, the R&D guys that design the products, the manufacturing guys that make the products that are given to the sales and service people who are selling them.”

Friel’s attention to keeping his employees motivated and satisfied has reaped its rewards on the human resources front through employee retention.

“Our employee turnover is half what the Fortune 100 best-in-class companies are,” Friel says.

Since Friel was named president and CEO in 1998, the company has created 800 jobs.

And it’s benefited MEDRAD’s top line, as well. MEDRAD posted $478 million in revenue in 2006 and has achieved 15 percent compound annual growth for the last 10 years.

The company has earned other top performer accolades, as well. It won the Malcolm Baldrige National Quality Award in 2003, and it has earned honors as one of the best places to work in Pennsylvania.

At MEDRAD, superior performance comes about because there are high standards, the environment to achieve those standards, measurements to gauge how well the company is doing against the standards and also incentives for meeting those standards.

“If you want to have a culture that’s employee- and customer-oriented, then you should measure how engaged your employees are, and you should measure how you’re doing against the customer,” Friel says. “You get what you measure, and then you reward and recognize. We reward and recognize people for doing stuff for the customer and making MEDRAD an enjoyable place to work. Hopefully, that helps to sustain the culture, even as we get bigger. “If you want to have people focused on customers and focused on employee engagement and involvement, then that’s the way to do it. It’s a conscious, proactive system for us.”

Following the five goals

Friel says everything MEDRAD does is predicated on its five corporate goals — financial performance, growth, productivity, employee satisfaction and customer satisfaction — that guide all of its activities. They are all interdependent, so from MEDRAD’s perspective, contented and motivated employees translate into happier customers, growth, lower employee turnover, higher productivity and, in turn, improved financial performance.

“We start out with our philosophy, why we exist,” Friel says. “We have our five corporate goals that are evergreen that we measure ourselves against. We reward and recognize people for hitting those. They’re all interrelated. If you have happy employees, they’re going to treat the customers better. If you have good financial performance, you’re a strong company and people like working for you. They all reinforce each other.”

When it comes to productivity, MEDRAD stays at its best by measuring its results against a demanding standard. Friel says the key to making sure that you are getting the right results is to measure performance and to change the metrics and raise the standards when it’s warranted.

“With productivity, we measure ourselves against the publicly traded companies that are in our industry, medical devices, that are profitable and are at least at $100 million in sales,” Friel says. “Our goal is to be in the top quartile in that group, and we have moved up into the top quartile. If you do the cut by companies with less than $1 billion, we’re actually No. 1 on the list.”

In the case of customer satisfaction, when the scores were running high, perhaps too high to be credible, and at a level that might allow complacency, Friel and his team decided it was time for a change. On a five-point scoring system, the company was counting responses of four and five as indicating satisfaction with MEDRAD’s performance. To challenge the organization and give some room to improve its performance, the company raised the bar.

“We were scoring 98 percent, so we raised the bar and said we’re only going to count fives from now on,” Friel says. “That dropped us down to 60 percent to 70 percent, which is still very high compared to other benchmarks, but it gave us more opportunity to say how do we get that up to 98 percent, like we were with the fours and fives. So the idea is to keep pushing yourself, keep challenging yourself, raising the bar and trying to get better.”

To measure its performance when it comes to employee satisfaction, MEDRAD surveys all employees twice a year. Friel says the survey achieves an 88 percent participation rate.

“My goal is to get to 100 percent,” Friel says.

When it became apparent that the company was scoring consistently high on employee satisfaction, instead of backslap-ping, MEDRAD decided to look at a more demanding standard.

“We were using a metric that we did fairly well against,” Friel says. “We’re looking at another one now, the Fortune 100 Best Companies to Work For, which is a different survey. When we piloted it, we found out that we didn’t score as well against that one, so we’re switching to it. The idea is to raise the bar. Don’t do the one that you’re doing well against and say, ‘Hey, look how good we’re doing.’ Do the one that challenges you a little more.”

MEDRAD gives an incentive to all employees for good performance by offering financial rewards to everyone for reaching its scorecard goals.

“We have a gain-sharing plan where everybody participates in a year-end bonus, and it’s based on how well we do against the scorecard,” Friel says.

All of the measures except for employee satisfaction go into the calculation, as it would tend to drive scores up by employees rating the company high on that metric.

“There, you’re basically paying people on how well they score you,” Friel says. “It’s a conflict of interest. But the point is, people have some skin in the game, and we share the performance with everybody. If we do well against these measures, we reward people for it, so there’s something in it for them to do well against the measures.”

Employee communications

Friel places a premium on keeping employees informed. He does it through his hands-on activities, like spending a day working in various departments.

“I have this thing of going out and working in the departments; I’ll work third shift on maintenance,” Friel says, admitting his enjoyment for running the machine that cleans the floors.

He issues a monthly report called Highlights, a document that goes into considerable detail about the company’s performance and current activities.

“I do a lot of stuff to try to communicate with the employees through multiple channels,” Friel says.

This includes bringing in a group of field employees from various departments twice a year to participate in the president’s council, where the individuals share their ideas and views directly with him. Employees get a regular newsletter, and as the company grows and it becomes more difficult for Friel and other managers to make regular site visits to interact with employees, he looks for ways to fill the gap. Currently, a companywide TV network to extend its communications capabilities is under consideration.

As committed as the company is to keep the lines of communication open with all of its employees, Friel recognizes that some employees in certain circumstances may feel reluctant to step forward to report what they might perceive as inappropriate practices in the company. For them, the company has an anonymous telephone hot line.

“If people are uncomfortable with the chain of command, uncomfortable with coming to me directly, uncomfortable with all of the other vehicles we have, they can anonymously call in,” Friel says.

Friel says that strong financial performance makes it easier to stay focused on things like employee satisfaction, but points out that MEDRAD has managed to live its values and stay on track with making sure that its work force is satisfied through the ups and downs of the business cycle.

“It’s easier to do this stuff when you’re successful and everything’s going well,” Friel says. “The real test of your character is when you get challenged a little bit. I’m happy to say that we’ve had our cycles, we’ve been on the roller-coaster ride just like everybody else, and I think whenever we’re in the down cycle, we live this as much as we do when we’re on the up cycle. That’s the test.”

HOW TO REACH: MEDRAD Inc., www.medrad.com