Michael D. Alter wants his people to make mistakes. In fact, he backs it up by giving out an award every year for the best new mistake made at his company.
“If you’re not making mistakes, you’re not going to be successful and you’re not going to move a business forward,” says the president of SurePayroll Inc., which employs 130 people.
Encouraging mistakes is a way of empowering employees, which Alter tries to do at the online payroll service.
Smart Business spoke with Alter about how to get the most out of your employees.
Q. What advice would you have on how to empower employees?
No. 1 is listen. If you are going to empower your employees, you have to listen to them. You’ve got to take some actions based on what they are saying. So, a lot of times we think that leadership means we always have to have the answer as a leader. I don’t think that’s true. I think we have to make sure the organization is being led in a direction, but you can look to others to help guide you and get insight into what that right direction is. So, I think that’s very important.
Second thing I think is important is motion is good in that if you avoid making decisions, avoid making the tough leadership calls, avoid driving the business in any direction, you either flounder and go nowhere or everybody starts making their own decisions and you fracture into different directions.
It’s a lot easier to turn an object when it is moving than when it is at a standstill. So when you think about the business, there are times when it’s better to make a decision even though you never have perfect information and you never know what the right answer is. Because, hopefully, you are smart enough to realize that you moved in the wrong direction or the right direction and to course correct. It’s a lot easier to make these course corrections when you are in motion than when you are not.
Q. How do you show people you are listening?
There’s different ways. When we listen to our customers, anyone who gives us a low score on our customer satisfaction score, we pick up the phone and we call every time, every customer. The lower the score, the higher-ranking person calls. We just want to hear what is going on. The fact that I’ll pick up the phone and call a customer … it shouldn’t stun them, but it does. You learn a lot, and it also, in a lot of ways, shows that we care and that we are listening.
With our employees, it’s a little different, but what we want to do is make sure we are hearing what they are saying and that we are communicating back what we heard. The things that we are implementing, we’re clearly explaining: ‘Here are the things we heard from you that we are implementing, and here are the things that we heard from you that we’re not implementing, and here’s why.’
The most important thing is if you choose not to do something, it’s OK as long as you can explain why because that shows at least that you listened.
Q. How do you handle a mistake from an employee?
You’ve got to say, did they take a calculated risk? Based on the information they made, was it a logical decision? If it was a logical decision based on the information that they had, you’ve got to reward them for it. Doesn’t mean you’ve got to give them a $100,000 bonus. But, you can’t make a scapegoat out of them. You’ve got to celebrate the fact that they tried. In baseball, if you bat .300, which means you get a hit three in 10 times, you get a couple million dollars a year, maybe $10 million a year. Business is not that different. It’s not every time you get up to bat you’re going to get a hit. Why do they call it ‘cold calling’ where you get 100 calls and you get one sale?
So, you’ve got to realize you’re going to have a success, and if you bat .300, it’s pretty good at your new ideas and your new things. So, you’ve got to really reinforce that it’s OK to try things and it’s OK to make mistakes.
Q. How has empowering employees to make mistakes benefited the company?
A direct way when you look at our referrals, so an existing customers says, ‘Use SurePayroll.’ We get about 20, 25 percent of our clients from existing customers who refer business. That’s the lowest cost acquisition channel I have. You could actually put that into real dollars and that is real benefit. Some of that comes from the fact that we are continuing to try new things and some of it comes from that fact that we are empowering our employees to do the right thing.
To give you some sort of specific examples of these kinds of moments of truth, some of the things we are doing to try something new, if you will, we have some new functionality in our product called the one-click payroll, allowing people to do payroll in one click. That came out of empowering our employees to say, ‘Hey, what are we hearing on the phones, what do people want, what do people need?
How to reach: SurePayroll Inc. (877) 954-7873 or www.surepayroll.com
John Sheptor had only been president and CEO of Imperial Sugar Co. for about a week when on Feb. 7, 2008, an explosion at the company’s plant in Port Wentworth, Ga., killed 14 people, injured 40 and shut down 60 percent of the company’s production capacity.
He had been brought in a year prior as chief operating officer to be groomed for the top spot as the company built itself back up after emerging from bankruptcy in 2000, but nothing could prepare him for the crisis he now faced.
“When I started, I was given the responsibility from the beginning to prepare a vision for the next phase of the life of this company around building operational capacity, giving this company new tools and capacities for its next steps into the future,” he says.
Sheptor was in the process of taking that next step when the explosion occurred. He had planned to spend his first two weeks having town-hall meetings to talk with as many employees as possible and share his vision with them. Instead, he had to deal with tragedy.
“Then this all happened and a few other priorities jumped their way onto my plate,” he says.
By trusting his team with responsibilities earlier than he would have liked to, the company worked through the disaster.
“I had to delegate and release critical success areas for this company to others and believe that the limited amount of time that I could give to them would be adequate to coach them to be successful,” he says.
As a result, the company is well on its way to finishing the more than $200 million reconstruction of the plant by the end of the year, which is an important first step to ultimately returning the company to profitability.
Crisis or no crisis, you can’t let go of your vision or strategy regardless of short-term demands and you can’t try to do everything yourself.
Sheptor trusted in his team to help move the $592 million company forward when times were tough.
“Because, at the end of the day, we do it as a team,” he says. “Somebody leads, somebody does the visioning, but we all collectively have to do it together or you can’t be successful.”
Here’s how Sheptor built a foundation that helps Imperial Sugar work toward a better future — no matter what the situation.
Assess your team
If the company had been content with keeping its current vision, Sheptor wouldn’t have needed to evaluate the people around him as much as he did because the status quo would have sufficed.
But, that wasn’t the case.
Sheptor needed a team that was open to change, so he had to take an assessment of who was capable of thinking in new ways.
“We needed to change because the industry was going through radical change,” he says. “Individuals in the executive and middle-management team that weren’t prepared to give up their attachment to the status quo for the opportunity for some different way of working together were an impediment and obstacle,” he says. “They needed to make a personal decision about whether they were going to be happy in this new organization.”
Since Sheptor had been COO for 11 months prior to becoming president and CEO, he was already shaping the vision and thinking about an executive team that could help him drive change.
“I had some level of assessment made about all of the team members because, as the chief operating officer, not every executive of the company reported to me, but I had some opinions already from my interactions with the entire executive team,” he says. “In that first three months after becoming CEO, I was able to see how the executives were responding to my leadership, my vision for the company and our collective plan for how that vision should be executed. It wasn’t really a three-month assessment exercise; it was truly a 14-month (exercise).”
One of the initiatives that Sheptor put into place after becoming CEO was a social event with his executive team. Since they all have busy agendas, once a month they would go to dinner, happy hour or a sporting event as a way of spending time together.
“People feel very safe in their areas of expertise,” he says. “When you are not in your comfort zone, you really demonstrate your individual confidence. You demonstrate your willingness to try new things, and you show how well you interact with others when you are experiencing a new event. Those are all critical observations when you are talking about changes for the future.”
Don’t let your personal drive to create a vision get in the way of spending quality time with people that are going to make the organization successful by executing that vision.
“Every new job has more demands on your time to do things than you have available,” he says. “What can easily be squeezed out of your schedule is quality time with individuals, both your team as a group as well as with them one on one.”
Aside from spending time with people outside of work, you should also look at employees’ past annual reviews.
“You can take a look at the last couple of annual reviews and see what they have been rewarded for doing and what they have not done well,” he says. “So, you’re in that sense looking through the eyes of others. Perhaps it is at a different time in the organization in terms of what was being rewarded, but at least you can get a sense for what activities these individuals were very good at and what they weren’t good at.”
Sheptor also gives his executive team members assignments for tasks they have never done before to see how they perform. He wants to see how well they deal with change and how creative they are in generating solutions on areas where they’ve not worked before.
For example, Sheptor could give his chief financial officer the responsibility of doing an accident investigation in one of the refineries to see how they perform as a leader outside of their area of expertise.
Sheptor also declared early on in his tenure as CEO that all officers would make four customer visits a year because one of the key strategic platforms for the company is to be a customer-centric organization.
“You can’t be customer-centric if your officers are not in front of customers,” he says.
“I’ve been watching who are the early adopters to that request, and who are cautious participants and who are resisters. That will weigh into my second regeneration of the leadership team.”
Much like you have to make changes initially because of resistance to the new vision, you may need to renew the team as you move forward with the vision.
“At the end of the day, when you arrive at your finish line, whatever that vision is or that strategic plan is, you’re likely going to arrive there with a very different team than you started with,” he says.
Don’t ignore resisters
When Sheptor was still COO and developing a vision, he recalled the reaction people had to President John F. Kennedy’s announcement that the United States would put a man on the moon by the end of the decade. The scientific community divided itself into early adopters, resisters and a bunch of people in the middle who were hopeful.
Kennedy took advice with regard to the early adopters and established a place for them to work collaboratively, and he took the resisters and gave them a place to work together to define all of the reasons why it wouldn’t be possible. Learning what those obstacles would be, that information was fed to the early adopters to develop solutions for those obstacles before t
hey even materialized.
Sheptor followed the same strategy. Instead of marking resisters early on and simply categorizing them as useless naysayers, he listened to their feedback and used it to better the vision.
“Listening to the resisters — those that were more committed to the status quo than to consider the possibility of change was useful to hear all the reasons it couldn’t change,” he says. “But the quality time was spent more with those who were early adopters and those that clearly wanted to be part of something new.”
If there are resisters on your executive team who are productive workers but not rolling with the changes, you should try to find another role for them in the organization.
Sheptor had a vice president who oversaw a large part of the organization but now reports directly to Sheptor. That person has a very strategic assignment but no longer supervises people anymore.
Start with candor if you want to move someone to another role within the organization.
“You can’t try to be deceptive in any kind of move of that nature,” he says. “After making my observations and doing some coaching and doing some feedback, it became clear the individual was not going to change fast enough or radically enough to be successful in their role in the new organization.”
After explaining where you think the person will fit and why he or she will fit there, you could have a handshake agreement where you will have to help that person be successful in his or her new job or that individual could leave the organization.
Sheptor did have to let executive team members go, but he says it is never easy to do so.
“There is a cost to every organization for every individual that leaves,” he says. “You have to make a decision that (the) cost is outweighed by the gain of having a different individual.
“There is a risk associated with making that decision that the person you hire may not do the job any better than the person that you let go. So, there is a risk and there is a potential gain. There is a loss of all the training, the relationships that individual has and the contributions that they are currently making. You lose all that when they leave. So it’s not something you take (lightly).”
Sheptor says you should know within three to six months whether someone is going to change.
“As an organization is moving through change, individuals that embrace the status quo over or above the opportunity of a new status quo, are an obstacle and an impediment to achieving your vision,” he says.
If you are certain an executive team member is not going to change, make the moves sooner rather than later.
“In the initiation of the visioning — the transition of the company from one state to another, if it’s clear to you in that three-month horizon that there are individuals that are in the executive group that are not part of the team, you have to deal with that quickly,” he says. “Because that one person influences potentially 50, 100, 200 others.”
Once you assemble a team around you that buys in to your changes, you will be able to delegate and move the company forward.
Sheptor and his team are doing that every day but are also not forgetting what happened in the past.
“I can tell you this has been the most challenging year of my life, both as a leader and as an individual and human being,” he says. “There have been tremendous challenges to keep the company stable and continue to prepare it for moving forward and, at the same time, being ethical and humane with regard to how we work with the families that have been so tragically impacted by this event. I would be understating to say that there has been more to do than hours to do it.”
How to reach: Imperial Sugar Co., (281) 491-9181 or www.imperialsugar.com
Over the past decade, Reed Smith LLP has grown by mergers and acquisitions. Sure, that growth is great, but it can be a problem if the merging companies aren’t compatible culturally.
“We thought we did our homework in each transaction,” says Greg Jordan, global managing partner of the law firm, which saw 10 percent growth from 2007 to 2008 and posted more than $980 million in 2008 revenue.
“We did our due diligence. We thought we were merging with organizations that had compatible cultures. I think we got that right. But, when you grow so quickly through combinations, this seemed to be an important checkpoint to make sure that we had everybody understanding what we were trying to accomplish, what we were about and that we were roughly on the same page.”
So in early 2008, Jordan brought in a consultant to conduct group meetings with more than 400 of Reed Smith’s employees from all levels to find out what they thought were critical cultural values to continue the success of the firm.
“For any organization that’s undergone substantial change, whether it’s change through mergers, change through key personnel, change through divestitures, whatever it might be — if you’ve gone through substantial change, then that might be a good time to do a double-check on your core values.”
To Jordan, the keys to creating a solid culture for the 3,300 people that work at the firm revolve around understanding those core values, communicating and then reinforcing the importance of them.
“It’s making sure that’s not just something that gets dusted off once a year, but it’s something that becomes an everyday part of the company,” he says.
Those values and the company’s culture are directly linked to the company’s success.
“It’s like having a healthy atmosphere at home in your family, and it has a lot to do with how people are doing,” he says.
Here’s how Jordan refreshed the company’s culture and how he is energizing it for the future.
Identifying what is critical in your culture can’t be a mandate from the top, which is why the company had a consultant running focus groups with lawyers and staff.
Since the consultant played a major role in collecting information for the company, Jordan had to make sure he had one with the right characteristics.
“They have to be good listeners,” he says. “They have to be open-minded. They have to be good facilitators to have a good open robust discussion. They can’t give the sense that ‘Here’s what management wants to say, so will somebody please say it.’ They have to make sure that people feel like it’s a good meeting and they really are getting a chance to say what they think.”
One you hire a consultant, you have to inform the consultant about what you want out of the process. In Reed Smith’s case, the consultant had worked with the company before, so there was already an understanding of the global strategy. But if you are starting fresh with a consultant, bring him or her into your offices and explain the company’s history and how the company has evolved to its current state.
“All those things are important because they help explain in context why a comment might be made,” he says. “That allows people to actually understand what’s driving it and it allows the consulting group to perhaps not be taken down the wrong path accidentally by misunderstanding comments.
“You certainly want to make sure they’ve had a chance to get a pretty good and thorough briefing on the business, and your style and the kinds of issues that are probably out there. Because the last thing you want is for them to be going down a blind alley without knowing it.”
Once that is all set, you can begin working with the consultant on what questions you want answered and what information you want. Reed Smith stayed away from simply asking employees to list the core values, and instead, questions were designed to illicit information.
Employees were asked questions like, “What are the kinds of things people need to do to be successful in the firm? What are the kinds of things you need to do to be perceived as a quality Reed Smith colleague? What are the kinds of things that you know you shouldn’t do if you want to succeed at Reed Smith?
“The questions were more focused on behavioral elements and then the core values sort of were derived from that,” Jordan says.
In larger markets, there was a cross section of employees from different departments and seniority levels participating in the focus groups. In smaller markets, everyone was encouraged to participate in meetings.
“We really wanted the participants to not just be made up of partners or leaders or high-impact people,” he says. “It was really people in different job areas, different levels of seniority, different pay levels.”
Once the consultant collected the information, Jordan had a team within the senior management team break down the information into a message that they could communicate.
While Jordan was heavily involved in that team, he didn’t lead it. You want to make sure you have a quality team going through this information with you.
“For me, it was making sure we had somebody on that team who understood the breadth of the firm,” he says. “We have a senior partner who is in charge of our strategic planning and merger and acquisition activity. He’s been involved in a lot of the expansion around the world. He understands the culture of the firm and the internationalization of the firm. He was somebody I could be sure would understand that core values that played well in one market would also be core values that fit and played well in another market.”
Fortunately for Jordan, the information the team received from the focus groups mirrored what the top executives were thinking. But team members still had to discuss how to communicate the values in a way that would be digestible. To get the best core values to communicate, you need to keep a few things in mind.
“You have to be open-minded, you have to be good listeners, you have to be prepared to challenge preconceived notions you might have about what the values and culture of the firm really are,” he says. “Because if you end up with something that actually doesn’t match the firm, you’re not going to really advance the cause. You really have to be open-minded and listening and then creative about how you reinforce the end result.”
The whole process from start to finish took about four months.
“You can’t overcommunicate on something like this,” he says. “It’s critical that you think about how you weave these values and thoughts into all your communications — town-hall meetings, whatever written communications, blogs or intranet. All the new communication devices that we now have — how can you utilize each of them to reinforce what you think are these important core values. If they are done well, they are not new to the company.
“They are actually the things that have been keeping the firm successful for many years, but there is a sharper articulation of them and you want to make sure you are getting that out every way you can.”
Keep it positive
You might have the urge to take your eye off
culture-related activities and items with the current down economy, but now actually might be a perfect time to emphasize your culture. Reed Smith’s global customer service center will be relocating to another building, while the legal offices will be moving into a new building. Both moves will be into places that have a more open workspace to create a more collaborative culture.
“From a business standpoint, our determination was that we needed to make sure in the Pittsburgh market, that we had … the kind of modern, state-of-the-art, open space that would incentivize people to join the firm,” he says. “(And) to stay with the firm and to feel like they were with not just a firm that has been in Pittsburgh for 130 years, but a firm which has now become one of the 20 largest firms in the world.”
While the decision was made to move when the economy was doing better, the company has since had to lay off employees. But, Jordan says this is still a good time to make the change to strengthen the culture.
“We’ve had some relatively modest, compared to other businesses, layoffs and some belt tightening,” he says. “One of the questions is, ‘Is this a bad time to be moving into a new building?’ My view is exactly the opposite. This is a fantastic time to be moving into a new building because it will help reinvigorate and reinforce the energy level and the culture that is critical to the firm.”
While not everyone can just up and move to a new, open environment, the general lesson is to remember that some positive culture changes in a tough economy can go a long way.
Jordan says the move will communicate to people they have a bright future and are working for an organization that is planning to be a long-term survivor.
“One of the things we tried to do is think about the impact that a new open environment could have day to day on people — how they feel about coming to work and how they feel about the future,” he says. “We didn’t know when we set this in motion, of course, that late 2008 and 2009 were going to feel as stressful, generally, in the world as they do.”
Laying off people is detrimental enough to a culture’s morale, but with a big expense like a move, those two actions can be misinterpreted. Jordan isn’t going to avoid those questions or any other inquires about what is going on in the company.
“You have to be open and direct,” he says. “When we announced the layoffs, in addition to individual meetings that our managers had with people who were being let go, I had a note that went to all personnel around the world explaining what was happening and why.
“Then, the next day, I had a video that was sent to everybody and posted on the intranet that everybody could click on. Thousands of people watched the video, which explained in more personal and direct terms why this business unit was slow because of what is happening globally, and that, as a result, there is less work. We, therefore, needed fewer lawyers who did that kind of work, and we needed to have less staff.”
You can’t hide when there is an uncomfortable message to communicate if you want to develop an open and collaborative corporate culture.
“You’ve got to be right out front,” he says. “You’ve got to just say, ‘Look, this is hard. We feel really bad about it.’ It’s very true. But, we let 4 percent of our associates and staff go, but we have a responsibility to focus on the 96-plus percent that are still here and to make sure we are running this business in a way that we will be one of the winners and survivors in the shakeout.
“When you explain to people that, ‘We’re not doing this because we don’t care, we’re actually doing it because we do, and we’re going to try and do what’s right for the greater good.’ That helps reinforce what we’re about.”
How to reach: Reed Smith LLP, (412) 288-3131 or www.reedsmith.com
Ronald L. Stewart had advantages some other senior leaders didn’t have. When he was CEO of five-year-old FS-Elliott Co. LLC, he didn’t have to deal with all of the levels of management and rank that other companies develop as they get older.
Instead, Stewart used a free-flowing organization where ideas were exchanged without hierarchy or positions getting in the way.
“Older companies, they have a lot of older structure and bureaucracy,” says Stewart, who was recently promoted from CEO of FS-Elliott to vice president of Fu Sheng Machinery Division, the parent organization of FS-Elliott. “We try to minimize that. We try to break down the walls and not create silos. When I see departments trying to set up barriers to doing things, I try to break them down. We want to keep a small, loose organization, keep a minimum management staff to cut out the bureaucracy because, as companies grow, they just, by nature, create bureaucracy, levels of management and things in my mind that stop decision-making.”
Because of the more open structure at the company, which manufactures air compressors, Stewart was also able to urge his 200 employees to think outside the box more easily than an older company that is already stuck in its ways.
Such was the case when the company was looking to fill engineer and shop employee positions. The company had no luck with search firms, and advertising in the paper was a waste of time. Through a brainstorming session, the company came up with the idea of putting up a billboard on major thoroughfare.
The billboard was similar to a “wanted” poster, which directed interested candidates to the company’s Web site, where they could apply.
They found quality people to fill the positions and created some buzz about the company, but it also exemplified the type of success you can have with an open-management style. “Companies that get too rigid, that’s where they get in trouble,” he says. “Obviously, as the company gets bigger, you have to have more of that structure in place. But at our size, I think it’s critical to have a very open management.”
Stewart is doing his best to drive that open management style that has so far helped FS-Elliott double its revenue from 2006 to 2007, when Stewart and his team pulled in $107 million.
Here’s how Stewart used that management style to grow FS-Elliott.
Interact with your staff
Analyzing your employees to make sure you understand their needs is an important process for Stewart. He sees the benefits in having annual reviews to keep employees informed on how the company is doing and how each employee is producing, but you have to have continuous discussions with your workers to really get the point across and see their capabilities.
“You have to get down in the trenches sometimes,” he says. “I go out in the shop every day and try to talk to people. Some people, when they get to higher positions, they kind of think they are a little above everybody else, and that starts creating walls.”
Stewart doesn’t get to talk with every employee on a daily basis, but talks to his staff and the staff below his staff every day.
“Obviously, today, with the market conditions the way they are, we talk constantly about our business,” he says. “That’s one of the advantages of having a smaller company, I can be more proactive and deeply involved in the workings of the company.”
While interacting with staff seems as simple as making the time and approaching the employees, you have to create an environment where they feel comfortable speaking with you.
One way Stewart creates that environment is having luncheons in his office with about 10 people.
“We do this once a week, and so in about six months, we get to talk to everybody in the company,” he says. “I found that to be a very effective way to get people to open up. Sometimes, you have to kind of break the ice a bit. Once you get people talking, even the entry-level people in the shop, they’ll start talking about their concerns, about rumors they hear. I found it’s been a very, very effective and inexpensive way to communicate with a company.”
Stewart breaks the ice by talking about the Steelers or the Penguins, the weather, or anything that will get people talking, before getting into the business side of things.
Someone in the management staff also has lunch with the group, and Stewart and the manager take notes about ideas and topics discussed.
“We try to get back to that person and say, ‘Here’s what we’re doing in that particular case,’” he says. “They may have a concern about their computer or about why we did something a certain way. We try to say, ‘Well, here’s how we do it. There is a reason for it.’ Or, ‘Hey, you have a good idea; let’s try it.’”
The input they get at the luncheons also helps to create buy-in for ideas. If someone gives you a good idea, keep the person involved in the process.
“If you come up with an idea, you have to help implement it,” he says. “You can’t just throw out ideas and walk away. Try to set up a team and figure out how to do it. Sometimes the ideas are good; sometimes they’re bad. But we’ll kind of let them run loose on that until they determine themselves if it’s a good idea or not. Then we give them the support to do it if it’s a good idea.”
During discussions with staff, don’t be the one doing all the talking. To be able to really analyze your employees and understand their needs, you need to listen more than speak.
“Listen to people around you, listen to customers, listen to your cohorts, listen to the people that report to you — make sure you get a full understanding of what is going on to get the real message,” he says. “Obviously, you have to be considerate of others and respectful of their opinions. But at the same time, you have to still be a leader and control them. To me, being a good leader is being very open.”
Interacting with employees also gives you a first-rate way to make sure the staff understands the focus of where the company wants to head.
“I get that message out constantly right down to our floor, our manufacturing floor, to make sure everybody understands what our main objectives are,” he says. “Our objectives are to grow our business and obviously make a profit for our shareholder and to have the right image with our customers.”
Staying in touch with all levels of employees is important.
“You have to engage all your employees, right from the person sweeping floors up to my level,” Stewart says. “They are equally as important, and they all have an important job to perform.”
Part of having an open structure is delegating tasks down the line, which can be a challenge for you.
“In our size company, you have to be pretty deeply involved, but you can’t micromanage your staff,” he says. “You have to get them to the point where they make their own decisions. But I have to be involved enough that I feel we are going in the right direction.”
The challenge in delegating can come down to the fact that you might be able to complete a task more efficiently than those below you.
“That’s a dangerous thing to do,”
he says. “You have to keep pushing it down and let them try. They’ll fail sometimes. You have to help them get through it — why they made the bad decision. But delegating is very important. You can’t run a business … and do everything yourself. It’ll kill you, and it doesn’t grow other people in the company either.”
Stewart says he sometimes even falls into that trap when he knows it’s not the best way to lead. With a background in sales, he sometimes starts to think he can do it better than one of his employees, but he has to remember to back off. Stewart learned that lesson from watching previous bosses become involved in negotiations with clients and then end up trapped.
“If you have a negotiation, you don’t want the top person there because you have no place to fall back on,” he says. “If I want to go, I know I can’t. If you do have a problem in negotiations, there’s no place to go.”
When a delegated task doesn’t get completed or is done incorrectly, Stewart deals with the manager because the lower-level employee might be more reticent to talk about a mistake or failed task.
If someone who Stewart works with directly is having problems delivering, he speaks with that person directly. If you’re in this situation, avoid the typical office setting where you are behind your desk and your manager is called in to explain the situation. Stewart finds getting out of the office is a better way to handle a problem with a manager.
“It has to be more personal there,” he says. “We have to keep discussing again what our objectives are so they understand it. It’s again much more personal.
“We go outside for a drink, get outside the building or go out in the evening sometime, and we’re talking business, trying to get to the heart of the problem.”
Getting outside the building can help ease what could be a tense situation, which could lead to a better discussion.
“You get a little more informal, and you get a little more openness in people,” he says “A more formal office environment, people will lock up a bit. It’s a little more difficult.”
At the end of the day, whether you are dealing with a managerial problem or you have to make a decision on a policy, you are the one who will be held accountable. But to create an open structure and stop walls from forming, you have to continually stay in touch with employees and give them responsibilities.
“I try to push down, as much as possible, decision-making where it belongs,” Stewart says. “I don’t want to get involved in a lot of the day-to-day things that lower managers should be able to handle. Some people are reluctant to make decisions so one of our challenges always is to make sure that you understand that and don’t be afraid to make decisions. I don’t have a problem if they make a mistake. I want them to learn from it. I don’t want them to repeat that mistake. Obviously, we’ve all made mistakes here, and we look at them and say, ‘We messed that up.’ Let’s go back and fix it and go on. We don’t want to dwell on it and try to attack people.”
How to reach: FS-Elliott Co. LLC (724) 387-3200 or www.fs-elliott.com
When Chuck Greco passionately talks about building a foundation, it has nothing to do with concrete or dirt. Sure, as president and CEO of Linbeck Group LLC, he is passionate about the buildings his company erects. But this foundation has to do with the integrity and the values he wants his employees and culture to have.
“We are very upfront with the values that we want to have or the principles that we want to have,” he says. “We have innovation, improvement, trust. We try to work with those three and say that’s really how we assure our business success.”
However, getting that message across to his more than 300 employees can be a challenge for Greco. With employees spread all over the country, he can’t see everyone face to face to really drive home the company’s values.
Because they don’t have everyone in one place, it’s even more important for the company, which posted more than $500 million in 2008 revenue, to have a strong culture.
“We have to have a strong culture because those people are not in the building,” he says.
“They are off in an autonomous entity creating this project, and therefore, you don’t have that micro-control over them.”
Even if Greco did have everyone under one roof, utilizing a strong culture is still a main driver to success with your employees and your customers, as long as it translates into performance.
“You have to do something with it,” says Greco. “You have to apply it. If it applies to performance and if it applies to a competitive advantage for the people that use us, that’s what grows our business.”
Promote the value of service
In order to develop a strong service-oriented culture, you have to be honest with yourself and know what your strengths and weaknesses are as a company, and that requires speaking directly with your customers.
Asking customers if they are satisfied with your company’s performance is a great indicator of whether your culture is strong and if your message is getting across to employees.
“That will tell you whether you’re going to make money or not,” he says.
Linbeck gives customers two surveys. One rates the company on how satisfied a client is on the project and if their requests were exceeded. The other survey is an overall survey that covers whether a client is happy in general with the organization.
At the beginning of a relationship with a client, Linbeck has a session with the client to find out what that company wants out of the project. The client could come up with three goals or 10 goals, but the questions for a project-specific survey will be centered around if those goals were met and if the client felt the project was a success.
“It might be how we interact with their volunteers. If it’s on campus, how you interact with the sororities and fraternities,” he says. “You’d be surprised with some of the answers. You think they only care about budget or schedule or quality. It goes beyond that. Those are just expectations. They wouldn’t even call us unless they knew we could do that. They’re looking for something beyond that, if you ask them the right way. We will build a series of these things and then we will measure it against it. That’s what the survey will be: How are we satisfying your particular goals for the project?”
If Greco isn’t driving home that he wants a culture of integrity and trust, there’s a good chance those surveys come back negative.
“We’ve probably never made money if a client is not satisfied,” he says
While some companies will have no problem filling out the surveys, you may have to track some down in order to get the feedback you need.
“You either have to take them to lunch and hand them the pencil,” he says. “They get it all kinds of ways. They get it on the Internet, they get it hard copy, you go meet with them and hand it to them. Every client has a certain way to respond, and you have to kind of find that.”
You also need to constantly stress to employees that they are providing a service to the client.
“You just have to constantly put things in that perspective,” he says. “That, without your client, we don’t really have a professional service to give. Then they start to think more like, ‘Maybe I should ask the client more questions. Maybe I should understand their business because I might see something they don’t see.’”
That type of attitude will lead to happier customers.
“Because people who are smart buyers who want to be ahead of their competition know they have to get a high-performance team,” he says. “They know that will only come through trust. They have to be able to trust the people on the team that they are working for their best interest.”
Educate new employees
You have to communicate what makes up your culture to new employees if you hope to maintain its strengths.
At Linbeck, new employees have about a four-hour “Cultural Distinction” group meeting with Greco and Chairman Leo Linbeck III. The duo lays out the company’s values and the importance of integrity and a collaborative work environment.
To avoid giving the perception that the meeting is an orientation that’s going to be a snooze-fest centered on a timeline of the company’s achievements, be careful how you refer to it.
“Don’t call it orientation,” he says. “Just tell them you want to talk about the organization.”
Greco and Linbeck give an actual story behind how the company evolved, instead of just listing off important moments in the organization’s history.
“It tells everybody that you are not coming to a meeting just for us to lecture to you,” he says. “But, basically, we just gave you insight into the whole business and, from henceforth, everything you are going to be exposed to that is off of that springboard or platform. If you don’t buy in to creating value in a collaborative way, then you picked the wrong company or we picked the wrong individual.”
Greco tries to keep the meeting to four hours, but sometimes it can go longer.
“It depends upon how interactive they get,” he says. “Here’s a time when you have the chairman and the CEO, dedicating time for you to ask whatever you want to know. Some of them follow up later with e-mails and some people want to test you right there test the convictions right there and that’s interesting and that’s always good because it lets you amplify where the boundaries are. It’s a good meeting to get that out of the way. Sometimes there can be as few as five people in the room. There’s no more than 10 though. I try to keep it a very small group.”
As important as it is to delegate tasks in business, the initial communicating of what your culture is should come directly from you.
“You can’t delegate this to HR. You can’t delegate this to a VP even. I don’t think it works. I think it has to be the CEO,” he says. “They know that they are at the end of the line. In other words, they are getting it straight from the top. We challenge them that if they ever hear it differently than what we’ve expressed it, and they’re confused, they are to come back to us to straighten it out.”
Greco uses the meetings to give a full plate of information regarding the company’s way of doing things, because he wants new employees to understand everything faster than employees did in the earlier years of the organization.
“I want to do it this way because what I observed before was that it would take someone about 10 years to get all the code and to understand why we do what we do, and we don’t have that time anymore,” he says. “Things move too quickly. My challenge as a CEO is to have people understand the fundamental principle by which we are making this decision or what we’re doing. They have to learn quicker. Nobody has that apprenticeship time anymore. They need to be productive quicker, and they can be.”
While Greco finds the meeting is a great way to initiate new employees into the culture, he realizes that every employee is not going to learn everything he or she needs to know from this meeting.
“That’s not the point,” he says. “The point is there is a tremendous amount of information in mentors out there that you will have to tap into in order to be able to operate within the organization.”
Looking back, that’s why Greco started these cultural distinction meetings. He thought about what it was like being a middle manager after 10 years with the company and the knowledge that could have made him a better manager.
“Executive strategy we think it’s beautiful, everything is thought out, it just has to be executed,” he says. “Then, all of a sudden, you find out the people who are implementing it on the very essential ground level haven’t heard it or haven’t heard your message in a way that they understand it. Then you find out where it got filtered and ... that’s at midmanagement. You find that your young project managers, they are not as confident about their leadership as you are. Therefore, they tend to control information, instead of being disseminators of it.”
That’s why you need to explain to new employees the nuances and subtleties of your organization. So employees know what they are doing and when to seek help when they can’t grasp something.
Because of the cultural distinction meetings, it doesn’t take them 10 years to know what to ask their immediate supervisor.
“They come out within two weeks and they are able to say, ‘Hey, I need to know more about this. I want to know more about that.’ That keeps my managers on their toes and keeps them locked in and just speeds it up,” he says.
Giving new employees information about the company’s culture upfront will give future leaders of the company better tools to be successful.
“What we’re trying to do is perpetuate the success,” he says. “So, I’m not trying to create a false culture that doesn’t exist. I want to build upon the one we have. So, you just express what you do, why we do it and hopefully as generations come through, they will take that as a basis and they’ll add to it and make it better or look at something that causes us to be weak in a certain area and then find a way to make it stronger.”
How to reach: Linbeck Group LLC, (713) 621-2350 or www.linbeck.com
Steve Schmid started out at Smith Dairy Products Co. sweeping floors when he was a kid.
Now he’s been the company’s president for more than 20 years.
To make sure the 100-year-old family business sees another 100 successful years, Schmid is always looking for ways to stay ahead of industry changes and consumer demands, something just about every CEO is facing these days.
But he offers a word of warning: “Don’t think that you can do it all by yourself,” Schmid says. “You might be a star, but you’re a better star if you’ve got your team working with you.”
For Schmid, it means working with employees to find solutions to problems, it means working to find better ways to serve consumers, and it means working the trade show circuit to make sure the rest of the industry isn’t leaving Smith Dairy and its 400 employees behind.
Only by working every possible angle can Schmid keep his $120 million company at the front of the dairy herd.
Here’s how he does it.
Stay connected with employees
Running a successful company requires getting everyone on the same page, and Schmid starts by involving employees in discussions and decisions.
“It’s just a lot of good discussion on it, and I think sometimes we discuss it too much,” he says. “But we try to, depending on what type of thing we are looking at, we look at a good situational analysis on it. What do we have to provide this product or service? Is it an investment in equipment in our plant or distribution system? Is it just learning ways to do things?
“There are always, one way or another, conversations along those lines, and it may sound easier than it is, but it just takes a lot of attention to some details to figure out what you have to give up to get that.”
To get the most input and buy-in from your employees, you have to involve them in the goal-developing process, which means inviting employees to meetings. By being in the meetings or involved in the discussion, they will become more relaxed and more willing to participate. It may not happen right away, but as they begin to catch on, they will open up.
“Sometimes, some people you do flat out need to ask,” he says. “Sometimes, you get responses, and sometimes, you don’t. Sometimes, in other sessions, we’ve broken a larger group into smaller groups and said, ‘This team come back with this answer.’ In the smaller group, it’s harder not to participate.”
You also need to venture out of your office and into employee territory to get some honest feedback, whether it’s for a specific project or just in general. Engaging employees in conversation will help them to buy in to your strategy and vision.
“(You have to) earn their respect,” Schmid says. “Make your trips into their space and have conversations and ask some questions and always ask, ‘How can I help you?’
“At least start having a situation where dialogue can flow. I know you can’t do that with everybody every day, but at least do it with your key people. And do that in a way, even if I’m wandering around and talking to production people, making sure I’m not cutting the legs out from under my VP of production by doing it. But you can still show interest in individuals and encourage thoughts to come out of them. It’s treating people like you respect them.”
If you are speaking with lower-level employees, it is important to set aside time to sit and talk with them.
“So much of it is getting to the individual on their turf that helps a lot,” he says. “Make it a point to go to various offices and sit down and talk. You can start out talking about, ‘What’s going on?’ Or ‘Whatcha doing today? How’s this project going? How can I help?’ I can also get into other conversations about, ‘How’s your dog?’ or some other topics. Sometimes some time spent on other topics helps open up (things).
“It can get some conversations flowing, but it’s by walking around and showing respect to people, not only when you’re there, but showing respect to people all the time constantly is what helps earn some feedback from people, too.”
And that feedback can help you refine your strategies or even come up with new ideas.
“There are a lot of people that have good ideas,” he says. “They can be coming from any place. It doesn’t always mean that every good idea is jumped on right away, but good ideas can come from all sorts of different sources. The more you treat people with respect, the more they will treat you with respect back.”
You also have to set up times for departments to exchange information with each other so there is buy-in and feedback between them.
“We have quarterly reviews where we get all of our VPs and the next level of people in one room and talk about what is going on by department,” he says. “What are the big issues we’ve dealt with and what are [we] dealing with in the next quarter. That is a good way that gets people to understand a little bit about what is going on.”
Keeping people informed will also create a more unified work force.
“(It’s) trying to let individuals know what in the world is going on, so that they feel good working here,” he says. “Hopefully, they feel, ‘I can contribute to help serve that customer better. We’re solving this thing together.’”
Stay ahead of your industry
If Schmid wants to stay ahead of the competitive dairy industry, he has to constantly be on the lookout for emerging trends or innovative solutions.
By staying involved in industry organizations and events and staying in touch with friends and colleagues in the industry, you can keep yourself informed of industry changes.
When attending events and conventions in your industry, you can talk to people and hear challenges other companies are facing and pick up a few ideas on how to beat those challenges. You don’t need to reinvent the wheel to be a success in business.
“(It’s) just hearing people talking about successes or frustrations or challenges one way or another,” he says. “Just listen. ... What are the challenges and frustrations and certain areas for success? You can learn a lot by that and realize that success might not apply here, but we can do something different along those lines.”
While the information given during the convention can be helpful, the best opportunities come via networking, which is why you need to be proactive and engage people in conversation.
“The meetings themselves aren’t as good as the time in the hallways when you run in to people and can meet people and talk over some harebrained ideas,” he says.
Once you’ve made those connections, you can form a group to meet and discuss ideas. Obviously, you most likely won’t be able to exchange ideas with competitors, but if you have noncompetitors you can meet with, take advantage of it.
For example, Schmid meets once a year with a group of noncompeting dairies, and they use that opportunity to kick around ideas and talk about successes and failures over the past year.
“That’s been a good learning process, a sharing idea process and just picking up ideas,” he says.
Diving into trade magazines will also give you an idea of what is going on in your industry.
“They give you a glimpse into what is going on, and you need to do that month after month after month,” he says. “You have to gather all the information you want, but it still comes down to, ‘OK, how can we compete better? How can we serve these customers better?’ You have to be driven by that.”
Stay ahead of customer demand
Paper or plastic?
It was a question Schmid and his team had to ask themselves about how consumers preferred to have their dairy products contained.
The products used to be in paper cartons, but consumer demands changed.
“It’s something that consumers wanted,” he says. “We could see that by watching what was selling in convenient stores and in the market, and [we] figured, ‘How can we do that to the dairy industry? How could we do that ourselves?’”
Customer needs can quickly change.
“They said one thing was important in the past, and suddenly, it’s not so important,” he says. “You are just paying attention to customers and seeing and listening to them on what is the driving force. It’s gone from taking cost out to providing more service and then providing less service to lower the price again, but then you get back to wanting more. The definition of service keeps changing, too.”
To try to stay ahead of customer demands, Schmid tries to get out of the office and actually talk to the customers. Because that isn’t possible all the time, he depends on his employees and his team to sometimes get that information in their discussions with customers. Though the company doesn’t have formal interviews, they spend time talking to them about what they want.
“It’s their buying decision learning from them what they like or don’t like,” he says “Sometimes, you can get out of them why you didn’t get the business or you did. If you didn’t, what did they like about somebody else’s program better than what you have?”
It’s that type of information that will point you in the right direction on how to better your company.
“A lot of it is looking at what’s going on in the environment around us and understanding that,” he says. “How we can compete well with the changing competition and customer and supplier and with the changes in all those different things and select one where we can really be the best at it? That takes a lot of input and hard work that we all have to work on.”
How to reach: Smith Dairy Products Co., (330) 683-8710 or www.smithdairy.com
When Barry L. Carlson was in the Army, he attended a leadership academy, where a general told him something that stays with him to this day.
“You can’t get people to follow you into a hail of bullets when you are standing behind them saying, ‘You guys go ahead, and I will catch up to you later,’” he says
As president and chief operating officer of Office Furniture Source, Carlson has a similar message strategically placed in his office where he can always see it.
“As a leader goes, so go the followers,” says Carlson, who helped lead the company to more than $7 million in 2007 revenue.
Smart Business spoke with Carlson about how to lead so that your employees want to follow.
Q. How do you get people to follow your lead?
I will listen to their opinions, even when they are not good at expressing them. So, their opinion matters. Two, when I tell them that this is my opinion or it’s is my final decision, they know I gave it some thorough thought and that I will back them up if they go do what I told them to.
The third is I will monitor whatever that is and I will be the first to admit if it isn’t working, and we’ll adjust. I don’t leave them hanging.
Fourth is, if it fails, I’m going to take the blame, and I’ll come up with a new plan.
So, I think people are pretty confident when they hear me talk. I talk with authority, and they know that I mean it, and they know they are going to be accountable, and they know that I’ll never put the blame on them. I might share the blame with them. But, when things don’t go right, I’m going to go back and say, ‘Wait a minute. Is this because of the plan, or is it because we didn’t follow the plan?’
Q. How do you get employees to let their guards down and approach you?
We start at the interviewing process. We tell people, ‘Look, here’s what it takes to work here.’ One of those things that we tell them is that you have to be willing to express your opinion.
You’re not going to get yelled at for having an opinion. But you are going to get yelled at if you don’t share your opinion. As a matter of fact, you will probably get fired. So, right upfront, they have to participate. Then we have a process called team meetings. Everybody in the entire company, with the exception of myself and John (Perin) our CEO, they are in a team — mandatory participation.
They elect their own captain, and the captains serve for six months. The team’s objective is, talk amongst yourself, come up with ideas, come up with situations. If you could deal with it, then you are empowered to just go ahead and just don’t bother me, just do it.
On the other hand, if you need help from another team, like our sales group might need help from the office group or something like that, then it’s your job to go over and tell them that and work through it collectively.
Then, I act like a league president. We have the captains come together, and they give their team’s report. That’s monthly, and that’s where all the captains hear everything everybody else is doing.
(My) role is to sit there and teach them and coach them on, ‘Well, how do you deal with it on your own?’ Because our mantra is to get everybody to know what they are supposed to be doing and then give them the power.
Q. What advice would you give other leaders to empower their employees?
First and foremost, you’ve got to tell them what the boundaries are. You’ve got to tell them what you want them to do. What are they allowed to do? Where’s the line that they really shouldn’t cross?
That’s probably hard for most leaders to express that because somebody is going to look at you across the table and go ‘Well, every day is different.’
Then, this is the hard part. You have to back them up. You can’t yell at people for exercising judgment, if you trained them and you coached them and then they go do it. Now, if they go outside the realm of reality, well, now you’ve got something to complain about, and they are going to get yelled at or fired.
That’s a world of difference. You have to understand: Am I dealing with somebody that is just a mustang that’s stretching our realm, or is this somebody that broke the rule? If somebody goes out and orders a new Mercedes Benz and puts it on the company tab, that wasn’t in their power.
How to reach: Office Furniture Source, (513) 531-0900 or www.officefurnituresource.com
While becoming an open communicator may sound simple enough, your insecurities could hinder the process.
To overcome that challenge, Birgit Radin, general manager of The DoubleTree Hotel Chicago Magnificent Mile, says that you need to remember that you are not the most important person in your organization.
“The people that you work with are the ones that really are making it happen,” says Radin, who led the unit to 2007 revenue of about $28 million.
Smart Business spoke with Radin about how communication can help you build an open work environment.
Q. How do you build a team environment?
The biggest issue is to communicate openly and honestly, and communicate based on the premise that the more somebody knows, the better they are equipped to understand the overall goal for whatever unit they are in.
If they understand the total direction and the goal and the big picture and that comes from getting good, open, honest communication then the more the individuals will be able to participate in the decision-making, as well as making right decisions in their own individual units.
Sometimes it comes across as overcommunciating, because you might tell somebody something that doesn’t directly affect them in their work unit. But if you know how everything works together, you can be proactive and maybe assist and maybe catch something that is on the verge of falling through the sift.
Q. Can you ever communicate too much information?
Obviously, you wouldn’t communicate confidential information. But I don’t think so. Of course, you have to filter through what is it that you are going to say, and sometimes you have to be cautious how you communicate because you don’t want to send negative signals.
You might have gotten a communication or feel a certain way about things, whether that is your ownership or shareholders or that might be whoever you report to as an individual. You might have gotten information in a very different way than the way you need to communicate it down. If you just push it down, it’s not very effective.
Q. How do you communicate bad news?
Always look at it as the glass is half-full rather than the glass is half-empty always the positive side of it. Look at it in a way of, ‘How can we make it better? What can we contribute to make it better?’ versus looking at it from a negative angle.
Q. How can a leader learn to communicate more clearly?
One of the fundamentals is to make sure that you know that person has the understanding of what you are saying, maybe having somebody summarize or repeat in their own words ‘This is what it is I understood to have heard.’
A good way is for somebody who is able to summarize this and tell me what it is that actually we want. ‘Where is the goal? What did we just communicate? How did we understand this?’
Or ask the question, ‘Where are we not clear in whatever was said?’ Sometimes you ask the question, ‘Who is not clear?’ People are concerned that they don’t want to sound ignorant, and they don’t ask the question.
It’s important to create an environment where nobody feels threatened. That’s … why you need to communicate with people, so that they feel they can communicate back to you and make it a very comfortable environment because people don’t ask for fear of sounding ignorant.
Q. How do you create an environment where people feel comfortable asking questions?
By being open yourself and allowing people to express themselves in terms of you asking for feedback and having them participate in the decision-making. Allow them to fail and don’t punish somebody when somebody fails, but try to see how can we prevent it from happening the next time. Or, ‘What went wrong; why did it happen?’ instead of giving the impression that, ‘Oh, my gosh. If I make a mistake, I’m going to be punished.’
Q. How has open communication benefited your company?
If you communicate openly … a lot people know what the general expectation is and people know what the general goal is and where are we going; that people feel it is important that I know this because my actions and my decisions are important to the organization.
With that, you have a certain automatic empowerment that makes you be a better person and makes you be a better member of the unit.
How to reach: The DoubleTree Hotel Chicago Magnificent Mile, (312) 787-6100 or www.doubletree.com
Just having ideas about
where you want to take
your company isn’t good
enough to get it there, says
Daniel Murphy. That’s why
Murphy, president and
founder of The Growth
Coach, says you need to
write those ideas down.
“If you don’t write it down,
it doesn’t become concrete,
and you can’t be held
accountable if you don’t
write it down,” says Murphy,
who leads the business
coaching organization, which
employs about 55 people.
Smart Business spoke with
Murphy about how to establish a clear direction and how
to elicit and evaluate employee feedback on that direction.
Q. How can a leader
communicate a clear direction
First, you need to walk the
talk yourself. So, as a leader,
once a quarter, I go engage in
a strategic focusing process.
I get away from sort of the
chaos and the confusion and
the complexity of the office. I
leave for a full day, going
through one of our coaching
sessions and spending the
time. I slow down; I get away
from the office. I elevate out of
the details and do a full day of
really reflecting, thinking, planning and shaping the big plan
that I see us having to have to
get where we want to go.
Every quarter, I’m walking
the talk where I am holding
myself accountable for the big
plan for me taking the time to
think and get clarity of direction. It starts really with the
leader or with that business
owner taking the time to get away from the details of the
business and do some real
thinking and planning, strategically, on, ‘How do I improve
and grow this business? How
do I improve and grow as a
Step two is constantly listening and learning from
your team. You can’t have all
the answers yourself.
Q. How do you create an
environment to elicit input
You have to have the
mindset to say, ‘I want
to hear all ideas to help
us get better at what we
do.’ So it’s that theory of
always looking for ideas
to get better. ‘We can
always do better’ is the
attitude. As a leader, it’s
never like, ‘We have
arrived,’ or, ‘We are good
enough.’ You are always
It starts with you as a
leader with that mind-set. It’s strategic, and it
says, ‘How can we get
better?’ So that mindset
and attitude permeates
Secondly, you’ve got to
really drive home the point
that we are a marketing company first and foremost. No
matter what industry we are
in, we are in the marketing
business — that our main purpose is to attract, serve,
delight, entertain our customers at a profitable manner.
When you have that philosophy of, ‘We are a marketing
company first and foremost,’
I don’t care what department
you work in. I don’t care if
you are the receptionist. I
don’t care if you are working in the factory. Any idea that is
going to help us do that better
or more efficiently or effectively, I want to know about it.
When you introduce to a
company that everyone is part
of the marketing ... you get the
ideas because they understand
that we live on the profitable
revenue we generate. You
bring everyone on board.
The other thing is, you have
to have an empowered management and employee team.
And as a leader to really grow,
you have to let go. But, you want to be in charge, and you
don’t need to be in control.
If you are controlling everyone and micromanaging,
you’re not going to get the ideas to surface because it’s
not going to an environment
where they think it’s OK to
take risks and it’s OK to fail.
Q. How do you elicit and
evaluate feedback from your
There has to be a filter mechanism of, ‘Is this something
that is going to help drive profitable revenues to us? Is this
something that’s going to help
us reduce cost? Is this something that’s going to help us
dramatically serve our customers or clients better?’
... Whatever your metrics
are or whatever your filtering process, there’s got to be
three or four questions you
ask to make sure it’s going to
get through those filters
because you don’t want to
waste time on a lot of trivial
You want to surface it and
you want to put it through
the filters. Everyone needs
to feel good that their ideas
are at least being heard and
considered. They can’t all be
adopted, but it’s more of a
culture you establish that we
want these ideas, we’re
going to vet these ideas.
The first thing is you have
to have an environment
where you want all those
ideas surfaced, so there is no
judgmental evaluation too
early. So, the ideas surface
(and) you are meeting with
your management team on a
For each company, that
rhythm and timing is different. It may be weekly —
that’s where they surface the
HOW TO REACH: The Growth Coach, (513) 563-0570 or www.thegrowthcoach.com
When Joseph M. Fortunato took over as CEO of General Nutrition Centers Inc. in 2005, conditions at the nutritional supplement company were not ideal. During rapid growth in the 1990s, Fortunato says everyone got a little fat and happy watching the money roll in.
Then the company took a hit in the early 2000s because of a downturn in the diet supplement and low-carb markets. Revenue starting falling, and then in early 2003, GNC instructed its stores to stop selling products containing ephedra, which resulted in $225 million in lost revenue.
“That’s really when we had to go back and just re-evaluate GNC in general — what our goals would be in the short term and the long term and then how would we accomplish those things,” Fortunato says.
On top of those troubles, the company saw five CEOs in 50 months come and go before Fortunato took over. That meant Fortunato, who was chief operating officer before becoming CEO, was essentially doing two jobs.
“We had quite a few changes at the CEO level,” he says. “A lot of what I was doing at that time was partially CEO work at times, because as CEOs came in and out, it was very hard for them to come in right away and assess the business and try to move the business forward because, once again, we are a fairly complex business for a retailer.
“So, I really had to take a point of view that there were things I was going to do to drive the business forward. As CEOs came in, obviously, I was trying to get buy-in from them, but I couldn’t wait until CEOs got up to speed with everything and decided what strategy they wanted to move forward with. Usually, they never got to the point where they were able to implement any of the strategies.”
Eventually, Fortunato became CEO and made his lone mission getting the business back on track by focusing on the core of the business and making the company’s foundation solid.
“Every business has a core component to it,” he says. “When you look and go through all the muddle of everything else that is going on around the business, there are a couple things — the core components of the business — that really, fundamentally drive the business no matter what.”
Grow your core business
When Fortunato took over, he put his sights on the present and ignored anything that wasn’t in the immediate future.
“At that point and time, I put off looking at strategies three, four, five years out,” he says. “What I said was, for the next two years, our focus was going to be on getting our core businesses shored up, playing to our strengths of brand, market penetration, vendor relations, product innovation, and revitalizing and taking advantage of those core category strengths we had, which were vitamin and sports.”
To get everyone focused on accentuating the core positives of thecompany, Fortunato had to simplify things across the board.
“When I started talking to everybody and getting people together, we basically had meetings every morning with the senior management team, and we talked about each area of the business and what needed to be focused on in each area of the business,” he says.
The company also had to simplify things for stores across thecountry by going to a one-pricing scheme.
“At that time, we were zone pricing, so we had about 25 or 30 different pricing schemes throughout the country,” he says. “One of the key things we did back then was we went to one pricing plan. Then, we were able to take advantage of our scale and market penetration and store base by advertising nationally, which we hadn’t been doing much of because the pricing strategy was different all over the country. That was a significant change in strategy that I think really was getting the business on the upswing again.”
You then have to drive that message of simplification from the top all the way down, which Fortunato did through business reviews once a month with every business unit in the company.
“So, people were not getting caught up in ... what I call the details and complexities of the business, but really digging down deep and understanding what was driving their businesses and what they needed to focus their attention on,” he says. “That has to come from the top.”
Fortunato also used the business reviews to monitor if the message was getting through.
“We would have very clear, concise direction as to where we wanted to take those businesses,” he says. “Every month, the leaders of those businesses had to come back with the progress they were making on the focus, on those core components of their business, and then we would do another review and try to keep that momentum moving along. The momentum is what is important. You’ll run into problem situations that you have to resolve as you move through those processes. But, staying very hands on at that point and time, although it’s not what you want to do as a CEO for the long term, is very important to coming through those more difficult times.”
When you are trying to focus back on fundamentals, it can be a challenge because employees naturally want to look at bigger and better things for their department. While that type of thought process is needed when growing a company, the opposite is required when focusing on the core strategies. You have to keep an eye out for employees looking at other opportunities within their department and get them focused back on the core drivers of the organization.
“People have a tendency to get scattered in their thoughts and scattered in their approaches to their business and trying to take too many things on at one time and nothing gets done right,” he says. “So, when you focus back on the core business and you set that thought process from the top that says, ‘Here is what I want you to focus on in your business for the next year. This is all you should bethinking about.’ That’s how you do it. You just take everything else off the table.”
While it may be easy to recognize this, oftentimes it’s hard to implement because you get into meetings and thoughts just start scattering before you know what’s happening.
“You have to keep reining it back in, because people’s normal mentality is, ‘Well, here’s an opportunity we should be looking at,’ and that’s great at the right time. ‘Here’s something we should be doing, and let’s try to do this and let’s try to take on this additional component for the business,’” he says.
To be successful, you have to continually reinforce that you want employees to focus on the core.
“You have to keep reining them back in and say, ‘No, here’s what you need to be focused on for the next 24 months, and that takes you away from a strategic approach at that time,’” he says. “The strategy becomes the core business, and you get more away from a visionary approach as, ‘OK, how do we grow the business three, four, five years out? The focus has to be, ‘If we’re going to get this business healthy and really get a foundation we can build upon, this is all we need to be focusing on for the next 24 months.’”
When facing a situation like Fortunato was, it’s important to start from scratch and communicate that everyone needs to focus on the core.
“We had to get a turnaround in the business, and we had to get back to fundamentals, which we did,” he says. “We had to change our marketing approach. We had to get product development kind of kicked in the behind, and that’s from our
vendors and internally. We had to grow that core business to replace that diet business that had fallen off dramatically. That, to me, was the turning point with the company.”
Make your move
By getting back to basics, GNC eventually started heading in the right direction. Halfway through 2005, the company started to show a turnaround, and 2006 ended up being a good year with the company posting revenue of $1.49 billion.
Yet, Fortunato still had to wrestle with the dilemma of when it’s time to start thinking more strategically and growing for the future. Even during the first six months of 2007, he was reluctant to divert people’s attention away from the core business.
“Now, it’s not that you’re not paying attention and thinking about what you could do to enhance the business during that time frame,” he says. “You’re getting your ducks in a row, but you don’t start executing against those strategies and take the risk of driving focus away from the core business again and then going back to a situation where you’re thrown back two years again.”
Fortunato also decided to keep the focus on the core because he didn’t feel he had the talent pool to take the company to the next level.
“That’s nothing against the people that were here,” he says.
“They’re fantastic people. They’re still here. They fill their roles very effectively at what they’re very good at. But the talent level you need, it really comes down to a decision — are you satisfied the core business is stable and a foundation is strong enough to move on and that we can grow upon this base?
“Sometimes you tend to be a little cautionary about that. Eighteen months sounds great, and looking back, (we) probably could have pulled the trigger at 18 months, but in conjunction with that, you’ve got to make sure you have the right talent.”
The talent that was responsible for the growth in the 1990s was not the same type of people GNC needed today. Back then, GNC needed people who would be able to come in and drive a fast-paced environment and who had passion and knowledge of the industry and the business.
“You’re just looking for people who take direction very well, who can think within the constraints of their area and execute,” he says. “It’s really a different mindset than somebody who comes in and you are looking for a strength in a merchandising area or a strength in marketing and a more of a creative culture and a mindset that is more visionary and strategic. That’s a different approach.”
Now, Fortunato wants people who think outside the box to complement the people who were able to drive the core.
“The talent from the outside cannot come in and replace that talent, because that talent is very specialized to this business and this industry,” he says. “But, the talent from the outside can bring new thoughts and processes into the business that that core individual does not have in regards to what else exists in the world and what else can we go after.
“We basically just beefed up our infrastructure to keep the core business momentum there and the core business talent pool there, and then bring in a new level of talent to really develop a world-class organization that would be able to deliver our objectives for the nex three or four or five years.”
GNC’s revenue has continued to grow. Its 2007 numbers were $1.55billion — a 4.4 percent increase over consolidated revenue for the same period the year before. Revenue increased in each of the company’s business segments, and Fortunato credits having that mixture of old and new leadership as a key to successful growth.
“My advice would be, look to your organization, make sure that the talent pool you’ll need to drive that organization forward is there and the senior management leadership is there as you have to back away from the core business,” he says. “Because, you can’t focus your energies on the strategic needs of the business and growing the core, adding onto those core assets the business has and still be involved as much as you were before on the core business. You need people that are going to be able to take that over, and you have a confidence level that they are going to be able to continue to drive that business because, once again, without that, you can’t do the strategic part.”
HOW TO REACH: General Nutrition Centers Inc., (412) 288-4600 or www.gnc.com