Bucci’s belief in the certainty of change has led him to transform his agency’s structure, acquire agencies in four cities outside Pittsburgh and push MARC to the top spot as the largest ad agency in Pittsburgh, with $40.7 million in gross profit in 2005 and capitalized billings of nearly $345 million. In addition, Bucci’s orientation to change forces him to look to the future and prepare his company for whatever may come controlling change, rather than being controlled by it.
Bucci spoke with Smart Business about hiring great people, getting their best and managing change so it doesn’t manage you.
Collaborate and evaluate.
I think my management style is twofold. One, it’s very collaborative. I like to bring people into the decision-making process and engage everyone in it.
But the other part of it is, at the beginning of the day, it’s about opportunity; at the end of the day, it’s about results. So part of it is about trying to inspire, trying to create a shared vision, but at the end of the day, you’re ultimately accountable for making something happen. By making very clear to them what the expectation is and what the desired end result is, and then letting them know that they have to meet the goals that are set, you hold people accountable.
Seek out builders.
Our organization is a growth organization. What we have today is not what we want to be, it’s only a piece of where we’re going.
I find that there are basically two kinds of people ... one group are the builders, people who enjoy taking what you have and trying to create something bigger and newer out of it. The other kind are managers, and those are people who just manage what you have.
I look for people who aren’t managers; I look for people who are builders. And I talk to them that way. I need someone who gets joy out of building something because the business we are today is only a part of what we want to be. We’ve built the framework, now we’ve got to build the house.
The other part you need to do that well is someone who is intelligent and hardworking, and another piece of it is that you want good people. If people are difficult to work with, if they’re just self-centered and don’t care about other people in the organization, they don’t survive well with us, nor do we want them. You can be very talented, but if you’re a jerk, I’ll give up the talent, I’ll go out and find someone who has just as much talent and is good to work with.
We’re collaborative, so we need people who know how to work with other people. Again, some people don’t like to do that and don’t do it well. That’s fine, but they shouldn’t be in our organization.
Beware of the wisdom of the crowd.
I was invited to speak at a conference. This was probably in the early ’90s, and the advertising business was not doing well, but we were doing pretty well.
After the big main session where I spoke, they had some breakout sessions. I went to one of them, and there was a group talking to advertising agency executives. This group was talking about how agencies work process redesign, bringing more efficiencies to them and all that.
At the time, I was looking for a new way to do business. I just felt that agencies had been doing business the same way since they had been invented.
These guys were talking about a new way of doing our work. It was just really inspiring to me, and it really led us to creating a whole new structure for advertising agencies. We were the first agency, literally in the world, to change the structure, and all that inspiration started at that breakout session. The funny thing was that at that conference, that session was the lowest-rated breakout session at the entire event.
Basically the reason was that the management of those agencies didn’t want to hear about doing things differently, specifically for them to do things differently. But it really led to our growth as we changed our whole structure. It was a dramatic change for us.
Look past today.
My role is a couple of things. One, create the long-term, you know, the five-years-out vision of what our company should be in the future, what it needs to become. And the other part of it is finding talent, be it people we bring in or by acquiring other companies that will help us get to our goal faster.
My role is to be always looking ahead, so I don’t think about what we’re doing right now, whether it’s good or bad. If it’s good, great, but five years from now, is it going to be right? I’m always looking for something new, looking for where the market can go, looking for how we can do what we do better.
My belief is you just can’t keep doing it the way you’re doing it forever. Change is going to affect you one way or the other. Change is always going to happen, so you either have to be prepared for it or try to anticipate it. As opposed to managing what I have, it’s more like, what do I need to be?
Take control of change.
There’s a culture of change in our organization, so change isn’t a scary thing for us, nor is it something that is revolutionary because we literally are always trying to change. So change is a comfortable thing for our organization. It’s not disruptive.
And I always said it’s easy not to make any mistakes; just don’t do anything. We’ve always tried things. Some of them have worked really well, some of them haven’t worked. Again, change is a constant thing. You need to control the change, or the change controls you. I’d rather be in control of it.
I think it’s incumbent for me to be looking all the time for what might be a new opportunity for us. Hopefully, you’re in front of that change and you’re ready for it when it does come.
How to reach: MARC USA, www.marcusa.com
No one would have blinked if Morgan O’Brien’s first move after becoming president and CEO of Duquesne Light Holdings in 2001 had been to pull his senior managers into a tight circle to decide where he should lead the company.
But O’Brien did raise some eyebrows when he decided to figure it out by starting from the outer edges of the company and working his way in.
O’Brien went out into the field and talked to what he calls “subject experts,” among them linemen, supervisors and office personnel, to hear what was happening outside of the executive suite and to learn what people in the company were thinking. In his mind, that’s where he would find the information that he needed to figure out where the company should be headed.
“When I took over as CEO, one of the first things I did was tell the board that I don’t want to sit down with my executives,” O’Brien says. “I want to go around the company before I meet with any executive. I want to hear from the people in the company what is going on and what is it that I need to know in order to run the business properly.
“So I went out for about three weeks and everybody thought it was a little unusual. They said ‘When are you going to sit down with the executives?’ I said, ‘I need to do some homework.’ I understood the company, I’ve worked here, but I need to really get my arms around what the issues are.”
O’Brien says his prior experience seeing executives who had walled themselves off from what was going on in the business and a fear that he wasn’t going to get the right answers if he did the same motivated him to reach far out into the organization to discover what he needed to know.
“It was my biggest fear: I was going to be sitting in an office somewhere making decisions without any good information because I used to see it in other people, where some really smart people would make a decision and I’d sit there and say, ‘That’s such a bad decision,’” says O’Brien. “‘Does he know about this or that?’”
On the road
O’Brien’s tour revealed that employees around the company saw some fundamental problems at Duquesne Light.
The infrastructure, aging in some areas and inadequate in others, was starting to reveal cracks, they said. Some older residential areas hadn’t been updated in decades, and in other cases, upgrades hadn’t been made to accommodate concentrated growth in areas such as Oakland, for example, where economic development and growth at the hospitals and universities were putting increased pressure on the system.
And like plenty of companies in the region and throughout its industry, Duquesne Light was facing an impending human resources crisis, as half of its current employees, many of them skilled field personnel, turned eligible for retirement over the next five to seven years, taking their institutional knowledge and experience with them.
“Things I heard back in 2001 when I became CEO were, ‘Look around, you’re the youngest guy in the room, and when we retire, who’s going to run the system?’” O’Brien says. “All the information I know, how’s that going to move on to the next generation? Have you ever thought of that?’”
O’Brien found that employees had concerns about the sell-off of the company’s power plants and some of its subsequent investments in far-flung business ventures. Duquesne Light, not unlike many other utilities in the wake of utility deregulation, had invested in business ventures unrelated to its core business.
“They’re sitting there saying, ‘What do we know about this, and why are we taking money out of the core business and investing it in other places?’” says O’Brien. “It created a lot of confusion, and I’d say more than confusion people saying, ‘Do these guys know what they’re doing?’”
O’Brien is convinced that he uncovered things in those meetings that never would have reached him otherwise.
“It was really good stuff, stuff that at an executive level you really might not think about,” says O’Brien. “You look at numbers, you look at reports, you ask questions, and for the most part, people tell you what you want to hear. That’s a little bit of the corporate world, but also for me, I was at a level where those types of issues wouldn’t find their way there unless someone was saying, ‘This is a crisis,’ or ‘This is a really big deal.’”
Those discussions influenced the decision to sell off unrelated and underperforming businesses and to return to the company’s core business, the transmission and delivery of electrical power. O’Brien moved to shed a water treatment business, energy management agreements and a propane gas venture.
And in a move symbolic as well as substantive, the company headquarters moved back downtown, a gesture that O’Brien says sends a clear message to local and state officials that Duquesne Light is committed to Pittsburgh.
“One of the things that we did when we sold the power plants was move the company headquarters out to Cherrington, out by the airport, and the reason for that is we had investments all over and people needed to be close to the airport,” says O’Brien. “When I took over, I said I want to sell off these businesses that aren’t performing and I want to move the headquarters back downtown where we’re all in the same building, people are all together, people see me every day and I can interact with them.”
Back to the board
O’Brien came back to his senior managers and board and offered up what he had learned. The company needed to put together an infrastructure improvement plan to accommodate a higher bar for reliable energy delivery that a changing economy demands to support its information systems and to bolster the system in areas where it was outdated or inadequate.
“We came back with an analysis of each of the different areas and said, ‘These are things we need to do, not only maintain the good reliability where we have it but also deal with where we’ve had issues,’” says O’Brien.
O’Brien proposed an infrastructure improvement plan, launched last year, to invest between $500 million and $600 million systemwide over three years to replace aging circuits and equipment and to improve power capacity.
He dovetailed the infrastructure plan with an initiative to head off the company’s impending human resources drain. With plenty of work to be done on infrastructure over a three-year period, O’Brien decided that the timing was right to ramp up the company’s training program.
It started a lineman program with the help of Community College of Allegheny County, a two-year associate’s degree program that combines instruction at Duquesne Light’s training center and two days of classroom instruction learning communications and computer skills. The program aims to add 150 employees to the company’s existing ranks of 1,400.
“As part of this, not only were we going to be doing this capital investment but that we were going to start replenishing the work force, because we really haven’t had on the transmission, the wires part of the business, any significant hiring over the years,” says O’Brien. “Historically, what we used to do is bring people in and they’d work their way up through on-the-job training and they’d learn the skills that our previous employees had, but we said with the junior college program, they can also become better communicators.
“One of the most important communications we make with our customers is when a truck is out in a neighborhood and somebody comes out and asks, ‘What are you doing?’ or ‘What’s taking so long?’ They’re representing the company out there ... so having someone with good communications skills is important.”
From a financial perspective, the company’s income statement reveals improvements in some key measures. While total operating revenue declined from $1.1 billion in 2001 to $922 million in 2005, primarily as a result of the sale of noncore and under-performing assets, Duquesne Light’s operating income has increased over that same period, to $178 million in 2005, compared to the $3.8 million it posted in 2001.
The infrastructure program is only a year into a three-year stretch, so it is too soon to make any judgments about its success, but O’Brien says that the improvements will allow Duquesne Light to comfortably accommodate the annual increase in demand it experiences, as well as reliably support additional loads imposed by new commercial development within its service area.
“This area of the population, the population growth is pretty flat, but every year we see 1 percent to 2 percent usage growth because people buy more computers, more appliances,” says O’Brien. “Electricity has a bigger role in what they do, and when they have all that, they want it to be more reliable because they’re depending on it more,”
The lineman training program to date has added approximately 100 new skilled employees to the ranks, and a third class of about 50 is scheduled to graduate next month.
While O’Brien is confident that the plan to focus on Duquesne Light’s core business is a sound one, he acknowledges that uncertainties and unexpected events can make earlier decisions look like the wrong ones. As utility deregulation took hold in the late 1990s, a lot of smart and seasoned minds in the utility industry made choices that proved to be mistaken.
“I think one of the things we do is look at what happened in our industry with deregulation,” says O’Brien. “People had certain expectations. What’s happened is completely different, and looking at the last couple of years with natural gas prices fluctuating so dramatically, a lot of it is hard to predict for the next five years, but that’s why we come to work, that’s one of our challenges.”
There is little doubt that O’Brien will stay close to the action and be ready to respond to change when required. Not only does he get the information he needs to make decisions with that approach, he says, but the process engages the employees and gives them a sense of ownership in it.
Says O’Brien: “It starts out by saying, ‘I want to find the right answer, but what it also does is includes people in the thought process, and it helps people feel like they’re part of the team.”
How to reach: Duquesne Light Co., www.duquesnelight.com
But putting together a direct sales force was only one piece of the plan that produced 50 percent revenue growth in 2004 and 2005 at the sales proposal software company.
Keeping the company going requires strong execution at every stage and every level, says Miller, Sant Corp.’s president and CEO. That means putting together a realistic strategy and a crack team that can sell, service and support the software product the 50-employee company is selling at a record clip.
Smart Business spoke with Miller about how he meets the challenges of fast growth.
What was your biggest challenge when you came on board as CEO of Sant Corp.?
First, understanding the shortcomings we had and, frankly, that was around control and controlling the sales process. When you’re selling software, there are a number of points around the sales cycle where it’s important for you to deliver certain value propositions to keep the sale moving.
When you do that indirectly, you’re just too far away from the sales cycle. And then we had to thread the needle of the sewing machine while it’s running. You had to keep it going while at the same time building a sales organization, which we did and migrated out of the partner model and continued to build up our sales organization.
What is the most critical thing a CEO has to do to meet the challenge of fast growth?
Establish a strategy. I call it ‘plan your work and work your plan.’ Establish a strategy that you’re comfortable with, that is, a strategy that can be executed.
There are a lot of companies that have strategies not as many as there were five or six years ago companies that have strategies that sound great on paper but just can’t be executed and you can’t sell through. So No. 1 is to have a strategy, and No. 2 is to execute it and, at the end of the day, if the strategy has a very high value proposition to the clients you’re selling to, it makes it a whole lot easier.
How do you know that your strategy is working?
Having a viable strategy all boils down to whether the goods and services that you provide are goods and services that customers will buy. There needs to be market demand for the services and the products you provide and, assuming that demand is there, then it really boils down to executing all the elements of that building the products and services, articulating them properly and having a good marketing campaign to make people aware of them, having good cash management skills to be able to collect revenue equal to or faster than you’re spending it and, obviously, there are a lot of nuances to that.
How do you meet that challenge?
It all starts with good people, making sure that our hiring processes identify the right people with the right skill sets that we need, understanding those and understanding how they roll into your strategy and having a good hiring process to bring the right people into the company to help you grow.
It’s across the board. It starts with sales, but once somebody procures, they have an experience administratively with us about receiving an invoice, receiving software. Then they have an experience with us that talks about hooking up the software and making it ready. Then they have an experience with us to get them operational, to have them trained to be self-sufficient. And then they have an ongoing support relationship with us.
What do you look for in people who work for you?
Certainly past experience, having been in that position before, having made decisions that need to be made in a fast-paced environment, and that comes with scar tissue. I think in a fast-growth company, intuition is every bit as important as the analysis of a particular decision.
People also need to be open and adaptable to change. Fast-growing companies change very rapidly, and if you’re not open to change and if, in fact, you’re not a change agent, you can actually get in the way of a business growing.
How do you keep up with the pace in a fast-growth company?
Hard work. Nothing replaces that. Hard and smart. As I’ve gotten older, smart now weighs into that as much as actual time itself. Building a good team, good people that understand their various disciplines.
Keeping all those balls in the air as a single individual is nearly impossible, so you really have to be surrounded with good people, you have to effectively communicate your strategy to them so that they understand it. I call it ‘everyone in the same boat pulling on the oars at the same time.’
It’s very, very much a team effort, and that starts with good people and overcommunication of what you’re attempting to do so that everyone’s actions all day long can be multiplied.
How to reach: Sant Corp., www.santcorp.com
Over the four-year period that Jay Woffington has been Bridge Worldwide’s president, the agency has grown from 38 employees to 120 and doubled its revenue. In late 2005, it became part of Wunderman, a British global relationship marketing agency.
For Woffington, the challenge during that period was to retain a creative and innovative culture as the agency expanded and took on new, highly visible clients.
As a former Procter & Gamble marketing employee, Woffington had an edge in knowing how the big players think and in collaring the company’s prized accounts. He knew, however, that to survive the growth the agency would experience as a result of that relationship, it would have to remain nimble and be ready to realign on a dime.
The solutions? Make sure that the work is fun, that corporate values and goals are clear, and exercise tight discipline on finances to reign in creative types without choking off the creative spirit.
Smart Business spoke with Woffington about the challenges of fast growth and how he fosters a strong company culture.
What did you learn from your experiences with fast growth?
For smart growth, as a business manager, what it teaches you is that when you’re growing at that rapid pace, you need to realize that your job and everybody’s management job in that structure is changing at a very rapid pace. In a year when you grow at 50 percent, what your managers do and what you do changes very dramatically.
If you ignore that, you run the risk of people playing out of position, not really focusing on how they need to be prioritizing their day. A person that might be right for a position as, say, a department head when you’re at 30 people might not be right for the position when you’re at 60 people.
That’s OK. It doesn’t mean that they’re not still a great performer, it means you just need a different structure, you need to think about it a little differently. It’s about managing growth, not just growing.
What were the most significant challenges as the company grew?
First and foremost, we were a small business back in 2002, we had 38 people so we really created a culture that thrived on a very entrepreneurial attitude, an open culture, and we defined that through the whole company.
It wasn’t just me sitting in a room saying, ‘This is what we want to be, this is what we want to stand for.’ We did it as an exercise with the entire company over several months. Maintaining that culture as we grew was the No. 1 challenge and continues to be.
Companies that don’t focus on company culture and are growing or even companies that aren’t growing fast, for that matter it’s an investment. We’re a service business, so having people who want to come to work and enjoy what they do, be engaged and committed, is very, very important.
We spend a tremendous amount of time upfront defining that and a tremendous amount of time, energy and money throughout our growth continuing to cultivate that. And obviously, when you’re bringing in a lot of new faces, that’s a huge challenge.
How do you foster your corporate culture?
If I had the entire answer, that would be terrific. I can tell you some of the things that worked for us. No. 1, articulating the culture is a very important step. So we wrote it down, we know the words that represent our culture. Having it written down is very important because then everybody can point to it.
No. 2, it’s about making it visible, and I mean that in every sense of the word, making it (visible) literally and figuratively to everyone in the organization, making sure that everyone can see it and knows it.
How do you do that?
There are very specific initiatives that we have in our company that are directly tied to our culture. No. 1 among those that we did at the end of 2004 and into the beginning of 2005 was we moved our entire office.
It’s a completely open environment that we designed from scratch, where there are no offices. It’s kind of an office without walls. It’s brightly colored, and everything is tied to the work that we want to stand for, including putting those words on the wall that I referred to before.
We’ve got a big glass wall that’s called the equity wall, and it has everything we stand for as a company.
How do you reinforce those things in practice?
We have initiatives and programs that tie to that cultural element. It can be crazy things like, one of our cultural words is ‘funaboration.’ It’s a word that we created ourselves that ties to the idea of fun and collaboration but within work.
For instance, on the final Friday of the month, we have a happy hour at the office. When we won our most recent client, ConAgra Foods, we had a giant feast celebration for the entire office featuring nothing but our client’s products. It’s still client-focused and focused on work, but it’s fun.
How to reach: Bridge Worldwide, www.bridgeworldwide.com
“They don’t have to have management experience, but they have to know how to work by themselves to put things together and move things along,” says founder and CEO Sheri Stoltenberg.
Not surprisingly, recruitment has been the toughest task for this 11-year-old company, says Stoltenberg, yet it’s been able to attract a smart and stable work force that has helped it grow. Between 2002 and 2004, Stoltenberg Consulting Inc. grew its number of employees 68 percent, to 40. And its revenue, which was $5 million in 2005, made a similar jump during the same period.
Stoltenberg spoke with Smart Business about how Stoltenberg Consulting attracts, screens and hangs on to top employees.
What’s the most challenging aspect of fast growth for Stoltenberg Consulting?
The hardest part is recruitment. We’re very picky about the people we hire, extremely picky. We go through a lot of resumes and a lot of interviews. I’m not looking for people who just understand the software product or just understand management consulting. In today’s world, I’m looking for someone who has a clinical background, who understands how to use technology and how to do a little more than use it.
They also have to be able to manage themselves. I don’t have someone trailing them saying, ‘The next thing you’re going to do is this.’ They need to understand that they’re driving these tasks. ... They’re working with people at hospitals to move things forward and accomplishing something.
How do you find the right people?
We utilize recruiting firms that specifically deal with health care information technology. There’s a lot of competition in that space for people. So what will happen is some of the very large companies are competing for the same people the smaller companies are competing for. They obviously have deeper pockets.
The way we grow, we look for long-term growth and long-term employees. The very first employee I hired still works here. The second person does, too. The reason we’re able to do that is we’re very clear in setting expectations.
How involved are you in the hiring process?
I talk to every single candidate. And they talk to other people that work here. And I’ve had people who want to talk to a client.
They usually talk to me first because ... after I talk to them, I can get a feel for who they’d be comfortable talking to in the company. They can ask questions like, ‘Do they really pay the bonuses?’ or ‘How long does it take to get your expenses back?’
We pay the bonuses and we pay expenses back if they submit them within three days of the end of the pay period, but they don’t want to hear that from me. They want to hear that it really happens with the other people that work here.
How do you approach the interview?
First, I put (the candidates) at ease, because they’re a little nervous. Naturally, [I discuss] the culture of the company, the way we do business, what are the expectations.
I can hire people over the phone, without seeing them. The call will take a few hours, [and] there’ll be multiple calls, often only with me.
One of the things I look at from a management perspective, and [that] I continue to do, is ask, ‘What do you know, and where could you use some help?’ You have to earn their trust. You’ve got to get people so they’re willing to talk to you. You have to take down the barriers, get them to remove their guard.
What kinds of questions do you ask in the interview?
‘If you’re out there working on the implementation of a project, what’s your favorite thing to do? What aspect do you like best?’ That’s probably going to tell you what they’re best at, because people tend to gravitate to, and they always hang their hat on, what they’re best at. The things they’re a little uneasy about, they tend to shy away from.
How do you screen potential employees?
As I’m interviewing them, I’m writing down the things they’re good at. I have found that you get a few who think they’re good at everything, but a majority of people aren’t going to do that, because I’ll say to them, ‘I’ll ask you one thing in this interview: Don’t tell me you can do something if you really don’t know how, because if you come to work here, you may be asked to do it. My goal is you’re going to be successful in this company.’
How to reach: Stoltenberg Consulting Inc., www.stoltenberg.com
Oesterle says a reverence for culture and the ability to carry it on will be instrumental in fulfilling the 130-employee company’s plan of adding 23 cities to its 26 markets over the next 18 months.
“We have to execute clear and simple plans, and in order to do that, we have to have people who will buy into the philosophies we have around here,” says Oesterle.
Oesterle delegates authority generously but takes plenty of opportunities to personally keep the company’s goals and culture in front of its workers. Employee lunches to introduce people from different departments, pairing new employees with veterans and the old-fashioned suggestion box are a few of the tactics that Oesterle uses to tap into the minds of the workers to foster cohesiveness and spread the message of the importance of teamwork and creativity.
The strong employee culture pays off, says Oesterle, by perpetuating itself as new people are hired. When it comes to recruitment, employees can quickly spot both the people who will fit in, as well as those who aren’t a good match, Oesterle says. As a result, turnover is low, and morale is high.
Oesterle talked with Smart Business about how he sustains the corporate culture at Angie’s List.
How would you describe your management style?
I’m fairly effective at delegating. My philosophy’s always been to bring in the best managers I could and give them bottom-line objectives and let them go out and achieve them. So I spend most of my time checking in with my managers to see how they’re coming with those objectives, and while that’s probably half of my time, the other half I spend making sure that I’m reinforcing the culture of the business and some of the themes that keep us working together.
How do you keep your employees focused on the big picture?
There are a lot of old adages that actually hold true here. You try to develop very simple strategic themes and goals, write them down, look at them a lot, and you talk about them a lot and you work that into all of your interactions day to day, so you’re just constantly repeating them.
Whatever the issue, let’s talk about that and why this is important to one of the simple, guiding overall objectives. I’m spending a lot more time doing that this year deeper into the company because I think it’s unbelievably effective.
It’s remarkable how smart people are when they know what direction they’re going, how productive they can be when they know what the goal is.
How do you stay in touch with your employees?
I’m spending more and more time on direct employee interaction. I’m finding that to be the most rewarding, productive time.
Every Friday, I have lunch with a portion of a department. We’ve broken the whole organization into six- or seven-person units. Sometimes that’s a whole department. We go out to a greasy spoon restaurant and we have the ‘Bitch with Bill’ session.
Two things take place here: I get to see the whole department, not just the management, and I get to talk about the themes. And then we get to talk about what they’re doing, and I get to hear about how it’s going, and all of that is in the context the bigger goals. I inevitably come back from those with two or three really good ideas, improvements or refinements.
And I think they go back to their jobs with a sense of, this is what we’re trying to do and by what time. These have gone really well.
How will you maintain that direct approach as the company continues to grow?
There are ways to leverage that. First of all, you’ve got to create apostles and not just your managers. To the extent that I’m having interactions with groups of people from around the company, then I’ve got people who can go out and be representatives, and that’s what these lunches are so good for.
In addition, we have a number of other activities like that, so when we get new employees in, we try to get them paired up with people that have been around awhile and give them an opportunity to interact.
Somebody started up the age-old suggestion box awhile back. I read all of those, and then I respond by e-mail to everyone in the company, so they all get to see what people are talking about and how I’m responding to those things. I use those as an opportunity to reinforce certain themes.
In that way, I am talking to everyone at once. I’ve got to get it infused down into the organization in the same way that, when we’re talking about recruiting, get a culture of high standards for people coming in the door.
I don’t have to interview everybody. We’ve got people who take care of that.
All of these activities that I’ve described are, in essence, training sessions. What I’m really happy about is how well that’s getting carried out when I’m not talking about it, when I’m not here to talk to the people.
It’s very gratifying to me to see managers who are buying into those techniques and talking about them and executing them. My job is to go out and reinforce them all the time. So far, so good.
How do you foster cohesiveness in your work force?
We have pretty formal procedures in place, even though they seem kind of informal. We have these lunches where employees are selected at random to go to lunch with one another and they have to take pictures and report back.
We run four or five groups like that every week. Your job is to get to know other people in the company, and your job is to be open and understand them, break down barriers. It’s a simple activity, but it’s scalable. It works really well.
We’re doing more and more of those things. They have no other purpose than to perpetuate a culture that we think is important.
What do you look for in people that you hire?
I look for energy, creativity and a constructive attitude. I look for people that are inclusive of other people and that instill trust in their people and are effective at motivating other people. Those are qualities that I respect and have come to rely on in people, so I would look for them in just about any business.
For instance, I took a leave of absence to run a gubernatorial campaign last year, and I was looking for exactly the same type of people, and it worked pretty well. My experience here helped me there, primarily in identifying people who could come in quickly, adapt and work together toward a goal.
How do you find those people?
It’s a little bit self-perpetuating. I don’t know that there’s any particular trick to finding them other than we spend a lot of time on the front end and after a time, you get a sense of characteristics, the answers to questions, experiences and trends and people’s lives that correlate to the kind of characteristics in the people that are here.
Once you get a batch of them together, they tend to recruit others like them. They’re all good at identifying those characteristics in other people.
What other tactics do you use to recruit?
We use the standard instruments. We post on Monster. We have just about everybody keeping their eye out for potential employees.
We always have a wish list of employees that we maintain, and we keep an eye on them for awhile. We may identify someone, and it might take two years before we hire them.
Our CFO’s an example. We’ve know him for a long time, and we said if we ever get the opportunity, we’re going after him.
We did, and we couldn’t be happier.
How to reach: Angie’s List, www.angieslist.com
Too often, the practice leads to high failure rates that penalize franchisors and leave owner-operators broke.
Jeff Osterfeld, CEO and founder of Penn Station Inc., has an aversion to failure, so much so that he takes every measure possible to make sure it doesn’t happen to any of his franchisees. Penn Station East Coast Subs has had only one failure in the 155 units it has opened, but that single flop, says Osterfeld, still stings.
“It has more to do with my personality than anything else,” says Osterfeld. “I’m a poor failure, and I have empathy with anyone who would lose their life savings.”
To hedge his bets against washouts, Osterfeld’s approach to growth has been deliberate, making sure that he doesn’t open the doors to just anyone who can afford the franchise fee. He is selective about who gets a franchise agreement, imposes strict stipulations on how they operate and develop and, in turn, offers franchisees an exceptional opportunity to succeed in a tough, competitive environment.
Little wonder, then, that he gets plenty of calls from prospective investors. He says he gets as many as 600 inquiries a year from prospective franchisees but just a tiny fraction result in a development agreement, usually for only a handful of stores.
Osterfeld talked to Smart Business about how he ensures success for his company and for his franchise owners.
How did you decide that franchising was the best way to expand?
I got out of Miami University in 1982 and opened up what was a delicatessen. At the same time, one of our competitors, Steak Escape, opened up. So did Great Steak and Fries, and I watched the lines at their stores.
Seeing the success that some of my competitors were having, I opened a second and third store that concentrated on the cheesesteaks and the submarines.
After three or four stores, I became somewhat frustrated by the fact that it seemed when I was behind the counter and hands-on, the customers were thanked, the fries were hot, the food was made right and all the cash went in the drawer. I became stretched and had three or four stores between Dayton and Cincinnati.
It was the situation where you’ve got your finger in the dam over here, and you plug this leak, and then that one over there springs a leak, and then the one you fixed three months before is leaking again.
I found myself bouncing back and forth between the stores and solving a lot of problems that were rooted in manpower, not having quality people to treat these stores the way I treated them. All the while, I was watching Chick-fil-A explode with their operation and model, and I thought, ‘This is a way to put the owner behind the counter.’
How did that help you grow the company?
Unlike a lot of people who go into (franchising) to grow as fast as they can because they don’t have to do so on their own money or on their own manpower and structure honestly, I went into this because it was the only way I saw to get that ownership mentality behind the counter.
We’ve had a pretty conservative record in terms of growth. We tell an awful lot of people no. It’s a pretty conservative approach, but we make sure that we get very hands-on people that want to be involved in the business on a day-to-day basis.
How do you qualify potential franchisees as a good fit?
We only do so with people who have been in the restaurant business. That gets rid of a lot of people who are trying to buy a retirement job, so to speak. We started doing that in the late ’80s, and I sold off some of the units that I owned. Immediately, they began to run better.
We also have a structure of ownership that requires active ownership in the franchise, including operations of the stores. Whether you open a single unit or multiple units, we require that you have a general manager that operates under our general manager guidelines. Our guidelines force the franchisee to either manage the store themselves in which case we know we have an ownership mentality behind the counter or hire a general manager.
In that case, they would have to sign an agreement with the general manager to split part of the profits with them. Then the general manager treats it like he’s an owner.
Why is experience in the restaurant business so critical?
First, the reason we want you involved in the restaurant business is not because we couldn’t teach someone from outside the restaurant business but rather because we find doing business with people who have already worked for whomever Burger King, Wendy’s McDonald’s, you name it that they knew exactly what they were getting into.
I think when you have a business like the restaurant business that is so reliant on an unskilled labor pool, it’s tough. It can eat you up, and it’s an emotional thing as opposed to an intellectual thing. We found that we’d get people from other systems, and all they’re really doing is comparing the machines their old piece of machinery, be it Long John Silver’s or Subway or whoever with us the new piece of machinery. We knew we could stack up very well in terms of return on investment. So when we came in and provided more service than they were used to better food costs, better paper costs, better profit margins, better sales than they were used to we’ve had little or no turnover. And they’re happy and therefore productive franchisees.
It put us in with a group of people who not only knew what they were getting into, but as is so often the case, when they look at us compared to where they had been, we shine from a financial standpoint.
With the emphasis on on-site management by the franchisee, how do you approach multi-unit development?
It seems that everyone that comes to you wants to do multistore deals, at least two or three, if not five, right out of the chute. We’ve got a guy right now who wants to do all of Atlanta.
What we try to do is talk them into doing a five-store deal, a three-, four-, five-store deal. We say, you need to identify a managing owner. A managing owner needs to have a background in the restaurant business, and they need to own at least 10 percent or 15 percent of the whole franchise.
The person will open up the first store. They can be the general manager for the first store, but by the time you go to your second, third, fourth store, we want that person to run the business and then supervise the general manager for each of those additional units.
What do potential franchisees need to demonstrate beyond a background in the restaurant business?
There are fundamental financial qualifications in any small business, and I think this is abundantly true in the restaurant business. Most fail because of a lack of capitalization or support.
We knew we were going to provide the support, but the undercapitalization piece, we had to learn that through the school of hard knocks. What happens is that you open up, it’s a gangbuster site, and everybody’s happy. But if you do like I did, the first three, four, five years you’re up and you struggle a little bit, it takes awhile to get up to average company volume.
People that are undercapitalized sometimes end up jumping ship, bailing out or going out of business, or we’re left to prop them up, none of which is good. So we try to make sure there’s enough capital in the business, that people have the appropriate staying power for the first year or two, in case it is less than a company average store, which often happens in a new area.
How to reach: Penn Station East Coast Subs, www.penn-station.com
Miclot has taken on the role as president and CEO of Respironics Inc., a company with a stellar record of performance over the long haul and an enviable balance sheet, but he’s doing anything but approaching his role as that of custodian.
“I’ve had the opportunity to be in a lot of different businesses,” says Miclot, “and they all have their sets of opportunities and their sets of challenges. The benefit of taking over a company that’s performing well is you have the opportunity to take some financial strength and leverage it.”
Miclot joined Respironics as part of its HealthDyne Inc. acquisition in 1999. Before taking the top job, he spent a year as chief strategic officer, developing a plan to map out the company’s future path. By the time he was named CEO in 2003, his efforts had turned out a plan that challenged the company expected to reach $1 billion in revenue in fiscal 2006 to substantially change the way it views itself, its structure and its markets.
From a company that traditionally has made products primarily focused on treating obstructive sleep apnea, Respironics is making the transition to one that takes a much broader view of market opportunities in the sleep and respiratory markets and that is willing to take a more entrepreneurial approach.
“We ultimately concluded that we were a market-needs company, and that we’re very focused on marketplaces and meeting needs of markets and meeting needs of new segments,” Miclot says. “And then it’s about competencies, what kinds of skills and talents do you need to execute on a strategy built upon those kinds of planning processes.”
Through the planning process, Miclot determined that Respironics should strive to continue to grow consistently and predictably, to deliver on whatever promises it made in the marketplace and to broaden its business beyond its traditional core. To do that, Miclot says, means taking some risks, but he says that not sticking his neck out is perhaps a bigger gamble for Respironics and its 4,100 employees.
“Probably one of the biggest risks I saw was to rest on our laurels and let our financial strength ultimately go through its natural life cycle and not have taken advantage of it,” says Miclot. “It’s hard to create a sense of urgency in an organization that’s performing well, but what I think has been central to our success is that we’ve really created a bunch of little businesses underneath the broader organization, and that allows you to create entrepreneurship around the organization, even when you’re performing well.
“One of the early discoveries we had was some of our core businesses had to be managed, nurtured and continued to grow, and underneath them it was very difficult to get a new initiative done because that team was so focused on the opportunity in front of them,” Miclot says. “So by creating additional business units, you create entrepreneurship.”
And while Respironics has carved out a lucrative chunk of the obstructive sleep apnea market and built much of its financial success on it, Miclot sees developing other business lines such as those that focus on therapeutic and monitoring products for infants and children, as well as those that treat other sleep disorders as a hedge for the company’s long-term performance.
“If you’ve got one part of your business in a quarter that’s not performing, you’ve got five or six others that can,” says Miclot. “That allows you to make very good long-term business decisions.”
The nature of its strategy, as Miclot describes it, embodies an approach that encourages more risk-taking and expresses confidence in the people who are in charge of its execution on a day-to-day basis.
Miclot cites an example of the way the process has worked at Respironics. One of its divisions discovered that there were opportunities that stretched far beyond its traditional business footprint in the marketplace.
“We had a business that was focused in on what historically we called our asthma and allergy division, and they were focused very much on the low end, commodity nature of delivering drugs to asthmatic patients that was very product-focused,” Miclot says. “The leader of that group, as they developed their business plan and their strategy under the larger strategic plan, really discovered that they were in the respiratory drug delivery space, and that’s a much bigger space, very consistent with the strategy, and there are all kinds of emerging opportunities in delivery of drugs via the respiratory pathway.”
The division made an acquisition, which brought in some needed technology and now, Miclot says, the business is much larger, with the potential of adding millions to Respironics’ revenue. Those kinds of successes have come about, he says, because the business unit leaders have been given the strategy without specific instructions about what to do or not do.
“It’s been my experience that people overthink strategy,” says Miclot. “It’s also been my experience that it’s often delivered in a book. Ours is a message and it’s about the nature and direction of the company. It’s not about the how, and a lot of people try to do the how. To me, the how is handled in the organization through its normal operating plans.”
The how, of course, is delivered by people. And Miclot says the strategic plan highlighted the key competencies the company would need and how critical having the right individuals in the right slots would be if the business plans were going to be successful.
“The biggest thing our strategic plan pointed out in terms of execution was we did have some bench strength issues, so we’ve brought some people in from outside the organization as well as promoted from within,” says Miclot. “When you’re growing at 15 percent to 20 percent a year at $1 billion, you’re at $200 million a year you’ve got to hire talented people to get that job done.”
The planning process, says Miclot, identified three key competencies that Respironics would need to execute its chosen strategy.
“The first is market foresight. If you think about a market-needs company, that’s a company that’s got to be able to look in the marketplace and sense and feel markets. The second is learning agility. It says if you create a learning organization and put people in stretch positions and allow them to learn by doing and create an agile organization that changes quickly when your environment changes, you’ll beat your competition every time, even in hard times, because you’ll see it first.
“The last one in a decentralized organization is teaming. It’s been my experience that nothing good happens until a team of people comes together to try to make it happen.”
The next critical step, says Miclot, is to match the talent pool to the competencies. To develop its talent, Respironics has put in place a structure that brings leaders along and helps them develop those key competencies necessary to carry out its strategy.
“It’s a very formal process,” says Miclot. “We have a leadership development process. We look at every single key position in the organization and we do three things. One, we look at ... what are the key criteria in that position. And then, we look at the person in that job and we match them to those criteria, and then we look for development things we can do to help that individual be more successful. Finally, we look at who’s behind them, in terms of succession planning.”
Having the right individuals matched with the competencies you need to succeed, says Miclot, assures that you end up with people who understand the strategy, can run the business units effectively and recognize growth opportunities. Once that’s in place, it’s almost on automatic pilot.
“And then, you get out of the way,” Miclot says. “Let them run.”
How to reach: Respironics Inc., www.respironics.com or (724) 387-5200
One caller was a woman who had once worked with Rogers. She recalled being in an Asian city when the image of Mister Rogers flashed on a giant public TV screen on a busy street.
In response to the familiar face, she said, some of the young folks on the sidewalks and streets began to sing a spontaneous rendition of the Mister Rogers theme song.
Fred Rogers was probably the least likely person to contrive a strategy to build a brand for commercial purposes, but what he did is indicative of the steps that are necessary to do just that. After all, what does a brand do but create a consistent, indelible image in the minds and consciousness of its target audience?
No doubt that most, if not all, of us could sing a few lines of one of Fred Rogers’ songs or would associate a sweater and a pair of tennis shoes with the enduring children’s programming wizard.
Was Fred Rogers a marketing maven? I don’t think he tried to be, but he did understand what creates a powerful brand. He sent a consistent, simple and comprehensible message to his audience and he never wavered from delivering on every level what he promised. He valued them as people, never took them for granted and always made sure that they got the best he could offer.
You might want to examine what your brand says to your customers and how effectively you meet its promise. Are you delivering what you say you will to your customers?
Sales and marketing people say that it’s much less expensive to hold onto an existing customer than to try to acquire a new one. The easiest way to lose one, it seems, is to fail to make good on your brand promise. Do that too often, and the days won’t be beautiful for long in your neighborhood.
And that’s the way Tony Battaglia likes it.
Battaglia, president of American Beverage, producer of the Daily’s brand of beverage products, enlists a group of 10 managers to debate and make the critical decisions that guide the 400-employee company in its competitive battle with some much larger industry rivals.
“That’s a style that I like, and I tell them to take that same style and drive it down even further into their departments and the other departments that they deal with,” says Battaglia.
A great idea, Battaglia believes, can come out of production, sales, finance or any other department, for that matter. The critical elements, he says, are that it gets fleshed out and, at the end of the process, everyone is on board with it. That is most likely, he says, if everyone involved gets and gives each other a fair hearing.
The approach takes a lot of the risk out of even the boldest choices. A recent decision by the company culminated in the reintroduction of its signature line of perennially popular Daily’s Fruit Mixers, complete with revamped packaging and a rollout event in September at New York’s Bryant Park Grill during the glitzy New York Fashion Week.
The next big decision by the company that each year bottles 1 billion of its Little Hugs drinks, which are wildly popular among kids, could be a bid to crack the lucrative teen and young adult market, says Battaglia.
Battaglia decided to talk with Smart Business about why a bad decision is better than no decision and why “I told you so” isn’t in the company vocabulary.
What is the decision-making process at American Beverage Corp.?
What I like to do is encourage debate within our company, and I tell people that there are four walls in our office here. I don’t want to see four walls become 12 walls by people saying, ‘This is my department, that’s your department, don’t cross.’
I basically say, ‘This is one company here, so if someone in production has an opinion about something in sales, put it on the table.’
How does the process work?
I have a core group of 10 people, and we meet regularly and we debate, we discuss and we say, ‘OK, here’s an issue that we have, which way do you think is the best way to tackle it?’
We’ll discuss it and at the end of the day, we agree on an action to take. As a team, I say. ‘Look, if we agree on this action, I don’t care if three people dissented on this originally, once the decision is made, we’re all going forward and we’ve got 10 people all marching in the same direction.’
I enjoy debate. I keep telling people everybody has an ego, but you can’t let your ego get in the way of smart business decisions. Or I could say I would listen, but if I ignored other people’s input, more than likely I would say that I would be making a lot more wrong decisions than I make today, just because other people have different insights.
Someone in finance can have a very good point to bring up about production efficiencies or sales. If you never ask their opinion, you’ll never hear it. The sales and production people will each go on their merry way.
How do you facilitate the decision-making process?
What I dislike in an organization is paralysis of analysis. They just continue to look at things in every which way. I’ve told them I’d rather make a wrong decision than no decision at all, because you can always correct a wrong decision.
I say, ‘Let’s discuss it but let’s take action on everything that we need to. We’ve got all the information, and we’re going to take action.’ The reality is, you’re going to make mistakes. To me, a team disagrees initially sometimes, but by the end, they’re all on the same page.
It’s bringing people together in that decision-making process that I enjoy. They challenge each other.
How do keep the ground fertile for that process to continue?
The way you discourage it is if you’ve got somebody who’s overruling everything. I could do it real easily. If we’re in a meeting and someone brings up a point and I say, ‘No, end of discussion, we’re not going down that road’ or ‘I don’t want to hear about it or I don’t even want to expand upon it,’ that discourages it.
You do it once, you’re more than likely to have someone who’s maybe not as strong-willed all of a sudden shrink into their chair and never say anything again. So, not to say it’s extreme as brainstorming, because you have to have some reality. In brainstorming, you just throw everything out there and there’s no bad idea.
But there is a sense that there are no boundaries here. If you have an opinion, put it on the table. The way we keep it going is meeting after meeting, allowing people to speak their minds and give their opinions, and I think by doing that, we’ve been successful.
We have made a lot of decisions most of them here have been correct, I think and by allowing people to see how the process works and implementing things after that process, people sit back and say, ‘Hey, it did work’ or if it didn’t work, we corrected it and moved forward, as opposed to having these meetings and people not seeing the fruits of their labors.
How do you maintain solidarity among the team?
Tom and Jim and Mary might have been dissenters at one point in time, but the next time they were on board and there were three other dissenters. So sometimes they may see themselves not in agreement initially and other times, they see themselves right on board.
People take different perspectives, but the bottom line here is when we open those doors and march out as a group of 10, all 10 are on the same page and there’s no finger-pointing. We’ve never had an instance where, after a decision was made and it turned out to be the wrong decision, three people come back and said, ‘I told you so.’
‘I told you so’ is not in our vocabulary because we made a decision as a team and we will win or lose as a team.
How to reach: American Beverage Corp., www.ambev.com