Dustin S. Klein
Herb Kohler believes in doing things big. And as chairman and chief executive of The Kohler Co., the Wisconsin-based plumbing fixture giant founded by his grandfather in 1873, he is in the perfect position to do so.
Kohler sets the vision for the family-owned business and its four divisions, 50 brands, 50 manufacturing locations and more than 30,000 associates scattered across six continents. He’s also a Forbes billionaire who has a passion for golf. Kohler’s Hospitality and Realty Group owns two world-class golf courses — Whistling Straits, site of the 2010 PGA Championship, the 2015 PGA and 2020 Ryder Cup, and Blackwolf Run, site of the 2012 U.S. Women's Open. It also owns the five-star American Club hotel and the Old Course Hotel in St. Andrews, Scotland, the latter of which sits on the fairway of the most famous hole in golf, the Road Hole.
“It’s just a fledging little business,” Kohler says. “It’s sort of wonderful.”
Smart Business sat down with Kohler to talk about myriad issues, including why it’s important to encourage risk-taking and how social media is changing the way business is done.
Mr. Kohler, you’ve forged partnerships with several major golf organizations in a relatively short period of time and expanded Kohler’s brand. How important is that ability to build and foster different kinds of relationships in order to diversify a business?
We’re fortunate to have a growing, multidimensional company that today goes well beyond just our core products. We historically put on large exhibitions in furniture, kitchen and bath products, so we have a talent in dealing with large crowds and large events. When an organization like the Royal and Ancient, United States Golf Association or the PGA America picks partners, they select the course first but then put all the infrastructure in support behind it.
Having our expertise is a major factor in their selection and final resolution. But it is relationships that make this possible; it’s what gets them to look at you in the first place. They are equally important, but relationships can’t carry a day. It’s the quality of the facilities and the quality of the support organization, the people and whether or not they have the capability on a continuing basis to support these larger things. These Majors provide a sizeable amount of the annual income of these organizations, so you have to be able to execute without fail. They really rely on you.
You’ve built a reputation as a leader who embraces risk. How critical is it in a culture of innovation to have risk-takers on your team?
It’s not easy in a large organization to foster any degree of risk-taking, but we ask all of our businesses, regardless of what they make or what they serve, to live on a leading edge.
They have to understand where that edge is — what’s at the forefront of their particular business field — and then, they have to have the imagination and the technology, combined, to be able to leapfrog that edge — get out there in front and stay out there in front.
We’re asking for an entrepreneurial spirit, and we do that with every business in our portfolio. Some do it better than others. Our senior executives in China are doing wonderfully well as an example.
Is that where you see the next big market for growth?
Yes. We have 10 plants there — eight for kitchen and bath, one for engines and one for power systems. Eighty percent of the product that’s manufactured in those plants stays in China. We are building a brand as fast as we can build it because within a relatively short period of time — 10 years — (China) will be the largest plumbing market in the world and the largest satellite power market in the world. It behooves us and everyone else to take a hard look at China.
What other international markets are on your radar?
India. India is perhaps 10 to 15 years behind China in its escalation, but it’s extremely important.
When you’re playing in a global market how do you protect your brand while you’re focused on growing it?
I make sure we live up to our guiding principles. The first is to live on the leading edge in design and technology, in product and process. The second is to maintain a single level of quality across all these product categories and across all the price points (that) are within a product category. We market from the low end to the midmarket to the high end and to the mass market. That’s a broad range of price points. Our prices vary because of materials, function and because of the level of detail but never in quality. That level of quality must be consistent. And, when you combine that level of quality with leading-edge products and services, that establishes our reputation. So that’s where I put my time and energy, making sure we live up to our brand.
You have embraced technology as part of your innovation. Where has it played a larger role?
There are many aspects of technology — the technology that we use to communicate, the technology we use to run our machines. We’re obviously seeing this explosion of technology in all aspects of our lives. When I built the first golf course, which opened in 1988, I was compelled to do it because of a stack of suggestions slips — physical suggestions slips. One hundred of these little slips of paper. It’s almost unimaginable today, but that was the mid-’80s. How recent! The world has totally changed. You would never find a piece of paper like a suggestion slip around today. No, you find your BlackBerry and send a message.
What about social media? What is Kohler doing in that area to connect with customers?
That also is a constant evolution. It’s remarkable. We’re just undergone a major renewal (at Kohler). We created a website for over 100 different organizations within Kohler. It was so broad. And then we created sites within those sites — and each of those works for the business and does what that business wants. But the engine underneath had a lot of standardization. It was a big task to standardize the approach within product fields, but on the other hand, it had to have a very local feel for people in places like China, Thailand and Vietnam. You can’t do business globally if you try to make all of your customers worldwide interact with you as if they were Americans.
How to reach: Kohler Co., www.kohler.com
I read a report recently about how U.S. manufacturing has fared in comparison to other industrialized nations over the past few years.
While global competition has increased dramatically during the past decade — including the notion that every company must have a China strategy — one of the more surprising items concerned an investment uptick in U.S.-based manufacturing plants.
That really shouldn’t have come as a surprise to me, especially considering that Bill Ford Jr., chairman of Ford Motor Co., echoed something similar at an event I attended in California late last year.
At the time, Ford mentioned that his company had made significant investments in its U.S. auto plants, including moving some manufacturing that previously had been done overseas back to the U.S.
Taken as a whole, this presents a much more positive picture than the usual doom-and-gloom scenario put forth when the conversation turns to the state of manufacturing in America.
This is one reason why, this year, we’ve chosen to focus our annual Evolution of Manufacturing Conference on “The Road Ahead …” and highlight what manufacturers have done to position their organizations for growth.
It’s easy to fall into a comfortable position of looking at all the negatives that have hit manufacturing hard over the past several years. But industry cycles ebb and flow, and like anything that ebbs and flows, there will be times when the tide is high and it appears as if you might just drown. Conversely, there will also be times when you believe you might just be able to walk along the beach and shoreline forever without worrying about slipping and falling into the water and being dragged down by the undertow.
The reality is somewhere in the middle. Manufacturers that have taken the sometimes painful step of embracing change in the face of global competitiveness have come to one of two conclusions — they adapted to meet the new challenges or they determined that they could no longer compete nor afford to make the necessary changes and bowed out.
Those companies about which you’ll read in this issue represent the first group and the ways that they’ve adapted to give them a leg up for the road ahead are impressive. After reading their stories, I welcome you to drop us a line and tell us about how your company has invested in change to hit the ground running for your own road ahead.
Contact executive editor Dustin S. Klein at email@example.com.
Every morning, Jim McCann awakens with one goal in mind: to move his company, 1-800-Flowers.com, forward.
“We are in a constant state of reinvention,” says McCann, the company’s CEO. “It’s like Andy Grove’s book, ‘Only the Paranoid Survive’; we’re very uncomfortable when we’re not moving forward. The most uncomfortable state for us is if we’re status quo. If we’re status quo, the world is continuing to change and we’re just not changing.”
That’s because innovation seems to come naturally for McCann, who parlayed a single flower shop in Manhattan into the world’s premier florist and gift shop. He accomplished this by thinking differently about how to interact with his customers and employees, along the way rewriting the definition of what a flower shop looks like.
In the 30-plus years since McCann started the company, he and his brother, Chris, who serves as president, have expanded through organic growth and acquisitions to become a public company with thousands of employees and annual revenue in excess of $700 million.
Beyond the well-known 1-800-Flowers.com brand, McCann’s holdings are widespread and include Cheryl & Co., The Popcorn Factory, Fannie May, Harry London, Ambrosia, BloomNet and 1-800-Baskets.com.
Smart Business sat down with McCann to discuss the power of innovation and how to build meaningful relationships with customers.
Q: What are some of the ways you applied innovation to adapt during the recent economic downturn?
We looked at this as a great opportunity, especially to find talent, but we did some other things as well that helped the company. We made sure that we were able to know the customer and serve them well. We took care of the finances and preserved our cash position. And we decided to invest for the future. The investments we made were in talent, technology and new business lines.
What a great opportunity to attract people that we otherwise might not have been able to attract. We also put money into video, social networking and mobile applications. And, we launched new businesses — Celebrations.com, a social network, and 1-800-Baskets.com. People thought we were crazy to do this in the midst of a recession, but they’ve proven successful.
Q: You’ve also been on an acquisition spree, not just in recent years but over the past decade. What’s been your strategy there?
The idea of following a strategic planning process is important to building your business. There may be things that are easier and quicker, but they don’t fit into the diagram that we’re developing to build 1-800-Flowers.com. We’re a public company, so the challenge is that the outside world may not understand why we’d buy rather than build. At that point, we tell them to trust us. We can’t detail the whole plan, but we explain to them that this piece isn’t just willy-nilly; it’s part of something larger.
That may scare away some investors in the short term, but those longer-term investors who have seen us make moves and watched them come to fruition will make their own judgment and, hopefully, trust us that we know what we’re doing.
We can’t not do things because some people don’t understand. We have to keep thinking ahead and looking at good opportunities for the company to grow and become better.
Q: How do relationships fit into the equation of interacting and serving your customers?
We have 30 million customers, and we still spend a lot of time trying to create relationships. You can measure relationships, but it comes down to the quality. You’re measuring the quality of a relationship. When we look at a relationship with a customer, the more engaged we can be with a customer, the better the relationship is.
I need a lot of help running our gift shop at 1-800-Flowers.com, and if I get the help from customers, that makes my job easier. It makes my input better, and I think it makes it more interesting and more fun for our customers to be part of the process.
I’ve been trying to do that for my entire life. Today, we’re doing this through technology, and it’s been getting easier every day because of the evolution of the new technologies. Whether that’s Facebook or Twitter, it makes that engagement not only easier and possible, but if you’re not doing it, you’re missing the boat. I want my life to be fun, more interesting. I want to have more and better relationships, and technology allows me to expand the realm and depth of relationships with vendors, staff people and customers. It’s all about the relationships.
Q: So how do you build those relationships?
Here’s one practical example of how we do things. About two years ago, a lady in Ohio wrote to me and said, ‘My sister tried to make this floral arrangement for my other sister’s bridal shower. You can see from the photographs [that] it’s a mess. But I bet you can figure this out.’
So I worked with some of our talented florists and we came up with a terrific design for a margarita bouquet. We took one of those 2-foot-tall margarita glasses and we did a flower arrangement, color appropriate, with attachments, and made a margarita display for the wedding shower.
Well, as we did this, other people both inside and outside the company heard about it, including friends of the bride, friends of the woman who asked for our help, members of our staff and several of our customers. They all got involved to help. When we were done, there ended up being this whole group of people conspiring and collaborating on these designs. And it was a great success.
So we saw an opportunity for a new product, and when we decided to take it to market as another idea for the company, I went back to the same group of people and engaged them. I said, ‘How should we market this? What should our advertising be? What should we say on the ads?’ So our customers suggested the product, designed the product, suggested the marketing platforms, designed them, contributed to copy and made the single biggest floral introduction in the flower business. And it was all customer-generated.
Q: In what ways have the customer service systems you’ve built played a part?
First, I challenged our people who were dealing with our customers to handle any issue that comes up in such a way that the customer is inspired to write to me about you and what you did and how you did it.
It’s not so much what you do as much as how you do it and how you empathize and directly connect with that customer. So I tell our people to handle it like you want to inspire that customer to, on their own, write to me about how you handled their issue.
The second thing I tell employees is that if you aren’t sure what to do, read this book, and I hand them a book that’s a set of binders filled with letters customers had written to me about the wonderful customer service treatment they received from a driver who brought a package, for a telephone customer service person or online help service person who helped them with something. It’s not like it hasn’t happened before, so I tell our people to read through this ledger and it will inspire you to do something above and beyond for the customers.
Q: You’re known for your innovation. Technology certainly is an area where the company has flourished. So how do you use social media and Internet marketing to push the company forward?
We’re using technology to get more intimate and personal with other customers. It sounds like a contradiction, but it isn’t. It’s true. How else can we get to know our customers well and learn how to serve them better? How can we recreate the personal relationship I had with our first 30 customers in our 700-square-foot store in Manhattan that we had 30 years ago? Thirty years later, we have 30 million customers, and the only way we can learn about them, to serve them better, to engage them, to get them to help us, is to use technology.
(A customer) might not be that interested in helping us design a new product and she might not be interested in helping us to come up with a new saying, but she really has an interest in promotional things because it’s an area of work she’s interested in. If we give her the opportunity to not be bombarded in the areas she’s not interested in but tickle her to see if she’d like to get involved in helping with promotional pushes, we engage her on something she’s already told us she might be interested in and benefit from her thoughts and outside-the-box thinking. It’s a good way to engage a customer without having to sit down across the table from her in her kitchen and talk about the ideas.
Every day we figure it out a little bit better; we take three steps forward and, hopefully, take only one or two steps back. We weren’t part of Twitter two years ago, but it’s a big part of our life today. What a great opportunity we all have to interact with our audience and find out what’s going on in their world while sharing what’s going on in our world.
Q: Let’s talk about being entrepreneurial. In what ways have you kept a culture of entrepreneurship in the company even as it has grown?
When people think about entrepreneurial cultures, it’s difficult for us to get our arms around that. But as I think about that and some of the more entrepreneurial people and organizations I know, such as the Ted Turners and Ted Waites (Gateway) or Wayne Huizengas of the world, those entrepreneurial heroes of mine, did they make (fewer) mistakes than other people? No, they probably made a lot more. The remarkable quality they had and that we try to embody is, when we take that shot to the stomach, it hurts, we fall down, but we dust (ourselves) off and get back up. That’s what it’s all about. We don’t worry about a mistake we made four years ago but instead worry about whether the mistake we make tomorrow is one we don’t get up from and learn from. We just have to keep moving forward.
How to reach: 1-800-Flowers.com, www.1800flowers.com
One look at dunnhumbyUSA’s Web site (www.dunnhumby.com/us/) is all it takes to understand the customer-first strategy that serves as the brand and marketing services firm’s competitive advantage: “We put genius into making sure our clients and our people get to know and treat their essential customers better than anyone else.”
It’s a scant 23-word description, but dunnhumbyUSA COO Stuart Aitken says it’s the mindset of every one of the firm’s 300-plus employees. It’s also a key reason why dunnhumbyUSA’s client roster boasts some of the world’s most recognizable brands, including Kroger, Kraft, General Mills, PepsiCo, Coca-Cola, Procter & Gamble and Sara Lee.
“We measure success by the impact on our clients’ customers, our clients’ business and, in turn, our business,” Aitken says. “Success is helping our clients win.”
The firm’s approach has also led it to be named to Greater Cincinnati’s “Best Places to Work” list for the past three years.
Aitken’s predecessor, Simon Hay, was named the 2009 Ernst & Young Entrepreneur Of The Year winner in the Services category. Hay’s success led to a promotion this past winter, and he moved to London, England, where he now runs dunnhumby’s U.K. and Ireland offices.
With 15 years of brand creation and management experience as his guide, Aitken was subsequently handed the reins of dunnhumbyUSA. He also serves as a judge for the 2010 South Central Ohio and Kentucky Entrepreneur Of The Year awards program. Finalists for awards will be announced later this month.
Smart Business caught up with Aitken to discuss innovation, building client relationships and how dunnhumbyUSA tests new ideas for its clients.
Q. How do you encourage and mine innovation as well as visionary thinking within dunnhumbyUSA?
We are a very nonhierarchical, collaborative organization. Anyone in the organization can bring an idea to me or anyone on the leadership team. We have a phenomenally talented work force that pride themselves on bringing new and innovative ideas to the fore.
In addition, we have open sessions where we share the latest ideas and innovations we have. At these sessions, individuals have the opportunity to question and contribute to the idea. One of our values is curiosity. We welcome and encourage debate, challenge and discussion on those ideas to drive better solutions for our clients.
Q. What processes do you use to test new ideas and then bring them to market for your clients?
The process we use very much depends on the idea itself and who would leverage the idea. We have a very innovative approach and use ‘test and learn’ as a way to drive new solutions.
Q. What are the some of the keys to success for fostering relationships?
The key to our success is our monomaniacal focus in good economic times and in bad on our clients’ best customers and rewarding the behavior we seek. It is this focus that differentiates ourselves and our clients in the eyes of their consumer.
How to reach: dunnhumbyUSA, (513) 632-1020 or www.dunnhumby.com/us/
IPOs on the rise
While it may not feel like much in the economy has changed, a recent study by Ernst & Young LLP that analyzed business activity among Russell 2000 companies indicates that many companies are on a growth path.
“The current numbers suggest that all boats are rising with the Russell tide — or at least a significant number of them,” says Maria Pinelli, Americas Director, Strategic Growth Markets, Ernst & Young LLP. “If you are one of the smaller companies, it’s clearly time to get growing.”
One way to grow is to take your company public. According to E&Y’s survey, IPO activity grew significantly during the second half of 2009, with 32 IPO entrants added to the Russell 2000. That’s more than double the 13 IPO entrants during the first half of 2009.
If you’re thinking about IPOs, here are just a few of the questions you should ask yourself to see if your company is ready. You can find more questions as well as whitepapers on growth and entrepreneurship at www.ey.com/US/EN/home/library.
- Have you developed a formal, comprehensive written plan and timeline?
- Has your organization begun acting like a public company?
- Are you actively addressing the four functional phases of the IPO preparation process: due diligence, drafting, SEC review and marketing?
- Have you determined your company’s potential M&A valuation versus its public company valuation?
- Is your team able to scale to meet the company’s growth projections?
- Have you communicated realistic timeline expectations to key stakeholders?
- Do you have a Plan B? Have you prepared a financing strategy to execute without an IPO?
Source: Ernst & Young, www.ey.com
With more than 14,000 employees, a top-line brand name to protect and a publicly traded company to run, Elsenhans, chairman and CEO of Sunoco Inc., had a lot at stake.
“We had to get clear about a competitive cost structure so we could position ourselves well,” she says. “We invested more in our people for leadership development and addressed gaps in our leadership pipeline. We also invested in our brand to position us for the future in our industry, and then looked for ways to turn weaknesses into opportunities. It was a chance to look back and decide what’s really important.”
That’s the core of Elsenhans’ philosophy for how to manage through tough times: Do those actions that ensure the company stays strong and robust, but give employees hope and an idea of where the business is going.
“There are a lot of things in the industry that gave us concern,” she says. “As a leadership team, we asked ourselves, ‘What are our strengths? How do we turn threats into opportunities?’”
One opportunity was to transform Sunoco into a pull company instead of a push company, bringing consumers to it through its various divisions rather than pushing out its products to them. Explains Elsenhans, “We were looking to raise our brand as a pull point and then use our company to be in transportation and energy markets and meet the demands of those future markets.”
None of this was easy, and Elsenhans says it required increased communication and a lot of explanation about what was happening throughout the organization.
“Visibility is critical, now more than ever,” she says.“Leaders have to be out there. It can’t all be video and e-mail. It’s also being able to answer (employees’) questions transparently. You have to be realistic and not sugarcoat where you’re going.”
Doing those things help a CEO build good will and secure much-needed buy-in from employees.
“By telling employees some idea of the path, it builds on it,” she says. “You get the framework out and let them fill in the picture. That’s how a larger cap company can be entrepreneurial, can get a business back on track and get it growing again.”
It also is important to work with customers that may also behaving trouble. Elsenhans says you can’t just throw them to the wolves.
“You have a contract, which protects your rights. And that’s important,” she says. “But if you can be a bit more flexible and meet a customer’s need during a tough time, you can build a better customer for down the road. Companies that have worked hard to be flexible are going to come out of this better.”
The bottom line is that CEOs managing through tough times need to have the ability to be flexible and adapt. That, Elsenhans says, will make or break your business.
“If you don’t innovate, you’re going to die,” she says. “Even very large companies. If you are not attuned to the disruptive forces in your marketplace and reacting to those through innovation, you’re going to be left behind.”
How to reach: Sunoco Inc., www.sunoco.com
When you’re open and honest, your employees will sometimes walk through walls to help the company survive rough times as it transforms itself. That’s how powerful a cohesive team environment based on trust can be.
However, the opposite holds true, as well. Those companies that don’t engender employees’ trust will often find themselves struggling to keep negative energy at bay. And those CEOs that play too much close to their vest or try to spin the challenges for their employees may find that years of trust get washed away in a heartbeat.
This tenet isn’t lost on Joe Carrabba, chairman, president and CEO of Cliffs Natural Resources. Even when the company was bleeding top-line revenue last year down 43 percent in the first three quarters Carrabba’s team was still optimistic that moves being made would help Cliffs weather the storm.
This positive energy helped Cliffs remain profitable while reducing expenses and experiencing an uptick in demand for its mining and natural resources products.
“You’ve got to treat people well in the goods times,” Carrabba says. “So you can get their dedication and respect in the bad times.”
Carrabba offered Assistant Editor Kristy O’Hara a behind-the-scenes look on how he built a great environment at Cliffs that has allowed him to communicate the naked truth to employees and have them step up their efforts to help the company pull itself out of the recession. That story can be found on page 29.
Part of building a powerful environment is ensuring that every person receives a positive and, some might say, awesome experience that delivers beyond expectations and creates something memorable.
Speaking of experiences, by now you’ve probably noticed our new columnist, Kevin Daum, and his column, “The Awesome Experience.”
Daum is a New York City-based entrepreneur, author and business coach, who has owned a former Inc. 500 company and worked with Gazelle’s founder and CEO, Verne Harnish.
His new book, “Roar: Get Heard in the Sales and Marketing Jungle,” hits the shelves of bookstores nationwide this month. Daum’s answer to consistency is for CEOs to embrace the idea of offering every customer, employee and vendor an awesome experience every time there is a touch point. You can read a preview of “Roar” at http://kevindaum.com/awesomeroar.
There are few game-changing moments in life. When they happen, if you’re not prepared to adapt, you may find yourself heading down the wrong path from that unique fork in the road, unable to retrace your steps.
Let’s say your target market undergoes a radical shakeup, caused by the economy or new legislation. What do you do?
Taking a wait-and-see attitude isn’t an option. The longer you wait to make your move, the greater the odds that your business will suffer or you’ll fail to be among the early movers that gain competitive advantage.
Reacting too quickly is just as dangerous. You might completely dismantle what isn’t broken rather than simply tweak something that just needs a small adjustment.
Consider Joe McAleese, president and CEO of Bendix Commercial Vehicle Systems LLC.
This month’s cover story subject was used to the cyclical nature of his business manufacturing air brake charging and control systems for commercial vehicles anticipating cycles that moved about 50 percent from top to bottom.
But when housing starts started to decline as one of the leading indicators for the current recession, Bendix saw a steeper drop in demand for new trucks and thus a greater-than-expected reduction in business. When the full recession hit, Bendix’s cyclical drop from top to bottom reached a whopping 75 percent.
“For us, the challenge is how do you manage through that,” McAleese says.
He could have panicked. Many of his competitors did, some slashing executive pay by 10 percent and laying off double-digit percentages of employees.
Instead, McAleese kept a level head.
“You can’t let yourself get carried away with the current situation and not recognize the context of the long term,” he says.
McAleese assembled a group of staffers that represented a strong cross section of the company rather than relying solely on a small group from his senior leadership team. Together, they put as many ideas and suggestions on the table as possible. Then they identified those that not only gave Bendix the best opportunity to sludge through the recession but also those that put the company in a strong position to emerge from the recession poised for significant growth.
That’s a good example of how to take the long-term view while still recognizing the need to make short-term moves that preserve your company. And when you face a game-changing moment, making the right moves adds up to smart leadership.
Contact executive editor Dustin S. Klein at firstname.lastname@example.org..
As chairman of the Joint Chiefs of Staff from 2001 to 2005, Gen. Richard Myers was the highest-ranking military officer in the nation and principal military adviser to the president of the United States. From that vantage point, Myers saw that leadership was more than just taking charge, making decisions and issuing commands.
“Successful leaders genuinely care about their people — the people they work with and the people who work for them,” says Myers, now retired. “After all, that’s how we get things done, with people. And people figure out pretty quickly when their leader doesn’t care.”
During a more than 30-year Air Force career that included stints as commander-in-chief of the North American Aerospace Defense Command (NORAD) and U.S. Space Command, Myers built a deep knowledge base of global security and leadership issues. Today, he serves on the boards of three U.S. companies, including Aon Corp. where he advises on global security and risk management issues.
Myers was in Cleveland in July to address a group of regional executives at a global security breakfast hosted by Aon Risk Services Northeast Inc. After learning how the American national security apparatus works, Smart Business sat down with the retired four-star general and discussed how risk-taking, decision-making and communication are critical components for any strong leadership team.
Q. During your career you spent a lot of time identifying people who had the capacity to be leaders. What methods did you find most effective?
You’ve got to test people and see how they react to the responsibility you give them and how they handle adversity. There is no other way to gauge leadership. You learn more about people from when they have some difficulties than when things are going swimmingly. It’s also getting to know people personally, so you can understand the underlying values that drive them in their life. You have to put all that into the equation when you’re determining who is ready for more responsibility. But you have to make sure you don’t get myopic. They may be responsive to you, but they’re maybe not responsive to their people.
You also need to take input from lots of different sources when you’re trying to figure out who ought to be promoted or given more responsibility. Peer reviews are important as well as what other people think. You have to cast the net wide.
Q. There are different schools of thought on decision-making. Some people say it’s better to be quick and decisive. Others say it’s better to be thoughtful and evaluate everything. Is one type better than the other?
In any organization, you’re going to have both types — some that are more cautious and some that are more aggressive. I think you need both.
What you certainly don’t want is somebody who is so cautious that they’re afraid to make a decision so that everybody under them is just totally frustrated and stewing (in) their own juices because the boss won’t get off his duff and make a decision. And you don’t want somebody who is so quick on the trigger that after a series of decisions it’s pretty obvious that they have not considered everything. Some nice balance is needed.
Q. You serve on the board of Aon and advise the company on risk-related issues. How important is risk-taking in the leadership equation?
You want people who are aggressive, that are going to take risks. Anything we do in today’s complex situations requires that you can’t wait until all the facts are in because that will take too much time. And you will probably never get all the facts and be able to easily say, ‘OK, this is the answer.’ If it were, [the issue] would have been dealt with at a lower level. Dealing with ambiguity and complexity is an important part of whomever you are looking at to give more responsibility. You want to see how they handle that.
Q. So it’s really a healthy balance?
Yes. You need input from both sides when you’re sitting around a table. For example, when I was chairman of the Joint Chiefs of Staff, you hoped that around that table discussing an issue you’d have some people that would be more likely to take risk and those that are a little more cautious. That allows you to hear the arguments on both sides and then come out with a way forward that considers everything.
For any important decision, you need as much of a 360-degree perspective around the problem as you can get. And it’s not always easy. If everybody was a ‘yes’ person, that wouldn’t be helpful. If everybody was aggressive and disregarded the risk part of the equation, that wouldn’t be good either. You want people who look at it from all different angles. When you do that, you can usually come to a good conclusion.
Q. In your new book, ‘Eyes on the Horizon,’ you point out problems with what you call ‘stovepipe bureaucracy’ and vertically aligned communication within an organization. What’s your solution to broadening the communication chain?
You need to have the people who directly report to you be part of this. It starts with how you develop your message and vision. The leader is responsible for developing the vision and strategic direction, but the more you make that a collaborative effort in developing that vision and strategic direction then the more likely that you’re going to have buy-in and the more people you’re going to have promulgating that vision and direction throughout the organization.
A big failure is that some people don’t recognize the importance of communicating that vision down and trying to get alignment within your business or organization. From my experience in the military, trying to get alignment from the private to the four-star (general), you want alignment in vision and strategic direction throughout the organization, and that is not an easy thing to achieve.
But if you develop your vision and direction in a more collegial way, then you’re going to have more disciples out there selling the message. I don’t think any one leader, no matter how good, can do that by himself. You have to have a lot of buy-in from the next level down and the next level down after that, and so on. The strategy is to build champions. They have to have real buy-in because you can’t dictate buy-in. You can only achieve it by working together.
Q. Does trust become a key factor in achieving that?
Absolutely. It’s true in any endeavor that trust and trustworthiness are important. You, as a leader, have to be trustworthy to the folks that are working with and for you, and you have to have trust in them. One is not sufficient. You have to have both to have the kind of relationship that I think you need in order to be successful.
Q. What’s the best way to build trust?
Doing what you say you’re going to do and being open and forthright. Whatever the problems are that you’re working on, you want to make sure that the people you’re working with aren’t worried that you have something that you’re not telling them and that you don’t have any cards up your sleeve that you haven’t played yet.
Be open and honest, and then you start to build that trusting relationship. Yes, the leader is going to have to make the decision at some point, but if people feel you’ve been open and honest with them in the process, they’re going to live with and support whatever answer comes out in the end.
Q. You’ve faced a lot of challenges in your career, including the aftermath of Sept. 11 and the war in Iraq, what’s been your greatest leadership challenge?
From a more strategic level, it was that the chairman of the Joint Chiefs is a part, but just a part, of the national security apparatus. It was trying to convince others in government that we needed to bring all our instruments of national power to bear to focus on the problem of global terrorism and global security. It wasn’t enough to just focus on the military instrument of power, in say, Iraq or Afghanistan. Instead, we needed to have all our instruments of power — the diplomatic, political and economic instruments — to be brought to bear, as well. The military was being disproportionately used and suffering the consequences. That was a real challenge, working in a bureaucracy.
Q. In the face of a crisis, it’s imperative to remain calm. What tips from your experience do you think business executives could apply during their own challenging times?
I focused on the job at hand. It wasn’t hard to do because we had American men and women in harm’s way, dying and being badly injured. That was a lot of motivation to stay focused. What I did was to make that the No. 1 priority. I relegated some other things to second and third priority.
I said, ‘I’ve got to be physically fit’ — that meant getting whatever sleep I required, I’ve got to work out a little bit, and I’ve got to eat. Also, get whatever spiritual nourishment you need. All that contributes to your mindset to make sure you are prepared for the challenge. I remember telling my wife at the time, I said, ‘Our relationship is going to take a backseat to what I have to do right now. And then, at the end of four years, you’ll be No. 1 priority and the family will be, as well. But right now, it has to be my responsibilities as chairman.’
Q. What’s the best advice you’ve ever received?
Probably two things. First, after a great report by the inspector general on a unit I was leading where we got great marks, a superior officer came to me and said, ‘That’s great, but what have you done for me lately?’ That made me realize how to put it in perspective. It’s like golf. You can have a great golf shot, but the question is whether you can do it again. You can’t rest on what’s already happened; you always have to be looking forward.
Second, no matter how smart you think you are, you can’t do it by yourself. You have to empower people. You have to surround yourself with good, smart people who can be part of a team and help you make sound decisions. This whole notion of not thinking you can do it yourself is important. No one individual can be perfect.
No less an innovator than Benjamin Franklin opined, “Early to bed and early to rise makes a man healthy, wealthy and wise.”
This formula for health, wealth and wisdom was effective for the Founding Father who not only invented bifocals but also created the first American lending library, first fire company and American fire insurance company.
Humbly following Franklin’s lead, we invented our own formula, which we’re using to explain the relationship among three key components of this year’s Innovation in Business program: Healthy ideas + healthy people + healthy companies = healthy communities.
So what exactly does this mean?
“Healthy ideas” refer to innovation. Ask “what if” and approach the status quo with an open mind. There is no such thing as too many healthy ideas. They appear in numerous forms: new products or services, business models, employee management styles, and strategies for improving customer service or product reliability.
“Healthy people” means wellness. When you and your employees set aside time to maintain your health getting enough sleep, eating right, exercising both your body and mind will be sharp enough to make positive contributions.
“Healthy companies” are the engine that drives the economy. They create jobs, generate positive cash flow, and have an impact on employees, customers and vendors.
Mixed together, these ingredients combine to create “healthy communities,” where we live, work and play. These are communities that are vibrant, bustling and electric. Their economic engines are sound, and the ideas generated by the companies located within them impact people’s lives.
At Smart Business, we think this formula works. But if you’re still skeptical, put it to the test by joining us later this month at the 2009 Innovation in Business conference, sponsored by Anthem Blue Cross and Blue Shield.
Help us honor this year’s Visionaries and Rising Stars and engage in a spirited panel discussion with four regional experts on innovation.
You can find profiles of all 15 amazing organizations and the people who power them in this issue’s cover story package.
When you think about it, taking tips from the likes of Franklin makes a lot of sense. After all, he did invent the lightning rod. And before I forget, he was also instrumental in helping create a little thing we like to call the United States of America. So who am I to argue with Poor Richard himself?
Contact executive editor Dustin S. Klein at email@example.com..
When times are tough, the first instinct of any leader might be to pull everything close to the vest, sequester him or herself, and focus on managing through the challenges.
That would be a mistake.
Pulling things in too close and cutting off communication with the people who most need to hear what’s going on your employees could compound the problems.
“If the employees understand the direction you are trying to go in, it’s much easier for them to understand an action that you’ve taken,” explains Anthony J. Alexander, president and CEO of FirstEnergy Corp. “They might not agree with you, but they understand.”
And when you need buy-in from the team that will be tasked with the hard job of execution, that’s exactly the way it should be. Whether you’re running a Fortune 250 company like Alexander, the focus of this month’s cover story, or managing a 50-employee services firm, when you face tough times, the most important thing you can do is keep employees informed about the situation.
In Alexander’s case, he reorganized the $13.6 billion energy powerhouse last year in the wake of a crumbling economy, laying off 335 people as a result.
Despite that, Alexander refused to tinker with his “out-front” management style, continuing to pound the pavement and meet with FirstEnergy employees across the company’s three-state footprint.
Alexander’s actions were prudent for many reasons.
First, he controlled the message. By meeting in person with people who were directly or indirectly affected, he was able to address questions and quell the rumor mill that was sure to sprout. He recognized that if you’re not disseminating real information, someone else who may not have the whole truth will spread his or her interpretations.
Second, he mitigated the inherent fear factor that accompanies budget cuts, layoffs and other large-scale organizational changes. While it’s not always possible to eliminate fear during times of change, when you’re willing to frankly answer questions, you secure good will from employees and often will reduce apprehension.
Finally, Alexander communicated his vision and reasoning to thousands of employees throughout the ranks. This ensured that they not only understood what was happening but were also able to willingly join him in the efforts to push the company forward.
There is no substitute for communication. Without it, you expose yourself to the very real possibility that you’ll just make any difficult situation that much worse.
Contact executive editor Dustin S. Klein at firstname.lastname@example.org.