After losing his job as an airplane pilot following the Sept. 11 attacks, Jerry Lasco turned to his hobby of food and wine for answers. With a desire to start his own business, Lasco brainstormed for a business idea that solved a problem people were experiencing.
“The problem that we wanted to solve was fear,” says Lasco, CEO of Lasco Enterprises LLC, the management company of The Tasting Room, Max’s Wine Dive and The Black Door. “The fear of not knowing how to navigate a wine store and not knowing how to navigate a wine list was a big fear that we wanted to solve.”
Helping average consumers understand a vast wine selection and taste the wine before they buy proved to be a good solution to the problem. Today, Lasco operates seven wine locations in three cities and had revenue of $12.5 million in 2010.
Smart Business spoke to Lasco about what it takes to get an entrepreneurial company off the ground.
Solve a problem. The question that I think is important for entrepreneurs is, ‘What’s the void in the market or what problem can you solve?’ Whether it’s starting a new company or a business initiative, what problem is it solving? You need to ask yourself a lot of questions and you need to do a very thorough analysis. Everybody has to go through some sort of due diligence process and gain a confidence level that their idea has legs. Then you take a leap of faith and put everything on the line to test whether or not you’re right. Due diligence is critical, and it’s specific to whatever industry or idea you have.
Prepare for growth. You don’t want to grow before you’ve got everything taken care of in your own backyard on your first business. You’ve got to have that down pat and you have to feel very confident in your initial business because that becomes your backbone. Secondly, the skill set that made you a successful entrepreneur — the risk taking, the idea, the strategic thinking — isn’t necessarily the skill set you need to be a growth company, which has a lot more to do with strong management abilities, organizational abilities, systems abilities, and visionary and motivational leadership. I think of entrepreneurs as inventors, but that doesn’t mean you can manage a complex organization and a complex system. You have to look in the mirror and figure out whether or not you personally have those skill sets or you need to bring those skill sets into your company. You have to make sure that you’ve got a complementary skill set or tool kit.
Manage your cash flow. There is a mindset that you have to have if growth is your goal. That means you’re going to have to reinvest and you’re going to have to hire more brainpower and manpower to allow you to grow. You have to have really good cash flow management. Running out of capital or running into financial troubles can devastate everything. There are countless stories about businesses that have had great ideas and probably would have succeeded except for a small mismanagement of cash flow. You never know when something unforeseen could come about. It’s challenging for small businesses because you don’t want to invest in accounting, a controller or a CFO because most small businesses can’t afford that. Whatever you do you have to know what’s going on in your books and in your cash flow situation, even if that means you’re staying up at night and doing it yourself.
Hire the right people. As you grow, it becomes much less about the entrepreneur and much more about the leader of the company. I think a great leader’s strongest asset is having the wherewithal to bring great people into the company. Get people that you can trust that have complementary skills. The greatest variable that is going to affect your growth positively or negatively is that you have the wrong people on board, a bunch of yes-people or people that aren’t contributing or aren’t complementary in strengths. If you put the right group together and you have a good idea, you have an excellent opportunity to get to where you are going. To be a good leader you really have to understand yourself and know what your motivations are and know what your strengths are. You have to hire people that have strengths in areas that you don’t have strengths in. Once you decide to grow, that’s when you have to specialize. You have to bring people in that are really good in those specialty areas.
How to reach: Lasco Enterprises LLC, www.lascoenterprises.com
John Magee walked away from a multibillion-dollar company to start over.
Before helping found Crane Worldwide Logistics in 2008, he worked for Eagle Global Logistics, a global supply chain company that had grown from $80 million to more than $3 billion in the time that Magee was there.
Unhappy with how big the company was getting and the loss of personal touch to its clients, Magee and eight others from Eagle left to start their own supply chain business, but they had to wait out a noncompete agreement for a year.
They took the time to scout how and who they wanted to hire and the clients they wanted to chase. One thing was certain: They didn’t want Crane Worldwide Logistics, a full-service customs brokerage and logistics company, to turn into the same thing they had just left.
“That sitting out actually gave us a chance to reflect on the industry,” says Magee, president of Crane Worldwide. “What did we see taking place in our industry? How did we want to launch a new organization in there? It was truly the best thing we could have done, because it allowed us to get so much set up the way we wanted to do it so that when we launched the organization 12 months later, we could do it, in many cases, very different than the way a lot of our competitors and the industry has morphed into.”
Not wanting to become another huge global company that lost touch with clients and not wanting to be too small and stuck in a niche, Magee and his other team members combined their expertise to develop their plans for growing and staffing their new company exactly how they wanted to.
Here’s how Magee grew Crane Worldwide to $252 million in revenue and 700 employees in 2010 by carefully planning for controlled growth.
Know your destination
Growing a company is ultimately not the biggest challenge, but being able to control it is.
You must clearly identify how you want to position your company and then stick to that plan.
“Since the late ’90s and into the turn of the century, our industry has seen a tremendous amount of consolidation,” Magee says. “All that industry consolidation created a few dozen big players that are $3 billion in annual sales and larger. They basically try to be everything to everybody everywhere. No matter what industry it is, what geography or what type of service somebody is looking for, they try to say yes and they try to do it. I don’t subscribe to bigger is better; I think better is better.”
Being better means staying true to how you want to position your company. You have to be diligent about not faltering from how you want the company to appear to employees and clients.
“You have to know what you’re good at and stick with it,” Magee says. “Don’t take on business for the sake of growing. Don’t sacrifice the company’s results because you’ve taken on something that doesn’t make good sense for your company. Don’t try to grow for the sake of growing, because you’ll spend time and effort and resources on nonvalue-added work. Everybody feels it. The company feels it, the people feel it, and it takes away from that feeling of being in high performance when everything is working right.”
Having started with a company when it was relatively small and watched it turn into a multibillion-dollar company, Magee knew that becoming a huge company wasn’t the right path to go down a second time.
“I can tell you the bigger we got, the harder it was to be great at what you do,” he says. “We want to be this global midsized player,” Magee says. “We want to have high touch, high service and really get back to the core brokering of supply chain solutions. I want to bring this high focus on it that I think a lot of the big guys lost, but be large enough so that people with global supply chains are willing to trust us with it. That was our vision. We want to be a $1 billion company. It’s not because that’s some magical number, it’s really to let the market and, more importantly, our clientele know where we are positioning ourselves.”
Hire for growth
When you have a clear path that you want your company to go down, you need employees who will be capable of continuing that growth. If employees are unable to handle the growth your company sees, you will end up having to let go of them and start the process all over. You have to hire for the future.
“What I saw [at my old company] was us outgrow our management team easily four times, arguably six times during my 13 years there,” Magee says. “When you start making management changes, you run the risk of getting this momentum built up and then, all of a sudden, you have to bring in a new leader who can take us from here to the next level, and by doing that, you run a risk of seeing that momentum come to a stop.”
Because of the experience of the founders of Crane, they knew that they would be able to get their company off the ground and grow. However, they still needed to be smart about who they looked to hire.
“Part of our plan for the future is let’s go hire these key positions above and beyond where we are today, where we’re going to be in two years, but let’s really think about where we’re going to be in five to seven years and let’s hire for that,” Magee says. “That has allowed us to attract the talent that we needed and ultimately that has led to what we’ve been able to accomplish in the first two years.”
In order to hire in front of your growth, you must constantly be on the lookout for potential employees. You want people who you can see working in a higher-level position than what you’re hiring them for.
“If you can envision that you can see this person being developed into two levels above what you are hiring them for, then you probably have a good candidate for the job,” Magee says. “It’s vitally important that your human capital pipeline can keep up with your sales pipeline. If you can’t bring on the right talent, you’re going to ultimately hit a ceiling even though you can continue to bring on revenue. It’s going to hit a ceiling and your customers are going to feel it. As we know with inertia, what’s in motion stays in motion, but what’s at rest stays at rest and you don’t want that momentum to stop.
“You have to prioritize recruiting. You don’t recruit when you have a need. You recruit every opportunity you can. I’m always asking, whether its colleagues, whether it's customers, or whether it's suppliers, ‘Hey who’s out there that I should know?’ Because when the time comes to pull the trigger if you’re starting your recruiting then, you’re falling behind. When the time comes to pull the trigger, if you already have multiple candidates that you’ve been getting to know and been recruiting over time, even though you didn’t have a role for them, it’s a lot easier to finish the process and bring them on board.”
Create the right culture
Controlling growth means setting up the right culture for your company. With the right culture, people will instinctively do things the way you want them done. This requires finding the right people to help you reach your goals.
“Having lived and worked all over the world, whether I worked with some great people or I competed against them, I was fortunate that I knew a lot of folks and a lot of my colleagues knew a lot of folks,” Magee says. “We spent the year that we were off creating a recruiting database. We couldn’t talk to anybody from our former company for 12 months from a solicitation perspective, so we went out and built a recruiting database everywhere else.
“We also defined what kind of culture that we wanted and we called it our Crane Character. I basically took the letters from Crane and I created our character statement. The C stands for customer-centric, the R for responsible, the A for attentive, the N for integrity, and the E stands for execution.”
It is crucial that all employees agree with and abide by the company culture that has been established. If employees don’t mesh with the culture then the odds of it working in the employee’s or company’s favor are slim.
“When we are hiring, can we see the individual that we are bringing on board … developing into two levels above what we are hiring them for,” Magee says. “Do they have the first four values within our character statement? Are they customer-centric, are they responsible, are they attentive, and do they have integrity? If they pass that test, then we bring them in the door. At the end of the day, if they don’t execute … they are probably not staying if they can’t actually do the job that we are hiring them for. But if we’ve done a good enough job betting it, then your success rate on bringing in the right person is pretty high.”
That upfront attitude has been a big reason for Magee’s success hiring people who can continue to drive the growth of the business. You have to be able to tell employees exactly what the company’s plans are and why.
“You have to lead by example,” Magee says. “Have integrity. A lot of leaders tell people what they think they want to hear versus just being completely open and honest with them. I know that’s the only way I want to be treated is if somebody just shoots me straight and is very open and honest. I think if you lead by example, have integrity and be open and honest with everybody and communicate, people will follow that. They want that from their leader and when they feel like they are getting partial truths, that’s not as good.”
HOW TO REACH: Crane Worldwide Logistics, (888) 870-2726 or www.craneww.com
The Magee File
Crane Worldwide Logistics
Education: Received a marketing degree from the University of North Texas
What was your first job and what did you learn from that experience?
When I was in middle school, I went and printed up business cards and started mowing lawns in the neighborhood for $6 a lawn. Mowing lawns was a commitment. If you make a commitment, you’ve got to stick with it. My friends would invite me to the pool or to the amusement park and although I would have loved to go, I said no I couldn’t I have to mow yards that day. That taught me the value of money.
What is the best piece of business advice that you have received?
Don’t set your goals too low and write your goals down. If you look, I think statistics say that only 3 percent of the world writes its goals down, but that 3 percent makes more money than the other 97 percent put together.
If you could have a conversation with any one person, who would it be and why?
Jack Welch. I have a tremendous amount of respect for what he did during his leadership at GE. I’ve read lots of books on GE, and Jack and I definitely don’t subscribe to everything that Jack does, but in my mind, he goes down as the best executive that’s ever run an organization.
Mark Seremet, president and CEO of Zoo Entertainment Inc., understands that, in the ever-changing world of technology, you must innovate to stay on top. Since being founded in the spring of 2007, Zoo Entertainment Inc., a developer, publisher and distributor of interactive entertainment software, has been recognized as one of the fastest-growing companies in the region because of its ability to generate new ideas.
“As an organization, not just externally but internally, we are very open,” Seremet says. “You have to encourage communication and you have to encourage ideas from everyone regardless of what their position within the company is.”
That openness and ability to have free-flowing ideas within the organization has led to revenue of $45 million through September 2010.
Smart Business spoke with Seremet about how he motivates Zoo Entertainment Inc. to innovate.
Identify your company direction. The most important thing to keep in mind when dealing with your organization is communication. Everybody needs to understand where this company is going, how can I help us to get there and understand what the metrics are that the company is measured on to know if you’re successful or not. If you’re not communicating and telling people what’s going on, what’s important to the organization, you’re unlikely to get innovation around the areas that you need it. You may get some innovation and some innovative ideas, but they may not fit with where you’re going with the company.
We have monthly meetings to communicate the direction of the company. You have to communicate how the company is doing, where we’re going, new initiatives that are being driven. At the end of the meeting, we have a period where anybody can bring up comments, ideas, thoughts, criticism whatever it may be. … We encourage anybody’s views there. You have to continually reinforce it, because it’s a message that people get every month. A lot of times, when you’re working in an organization, you don’t want to just feel like it’s a job or you’re stuck and you don’t really know how you fit into the whole thing. So we talk about how all of those pieces work. You just have to keep communicating that message and what’s important to the company every month.
Create an innovative culture. It’s interesting to look at other businesses that are innovative or maybe models that are working that may be similar to your industry but not necessarily in your industry. Then learn all you can about what that company is doing and what some of the drivers are in their success and then try to employ those same drivers into your business. That’s a good way to explore innovation and culture around that innovation. When you think innovation, you often think of technology, but you don’t necessarily just innovate around tech. You could innovate in customer communications, manufacturing, whatever it is. There is a lot you can do just by looking at these other organizations and applying that knowledge to your own company.
That culture comes from the leader, the CEO. I think it’s important that CEOs manage by walking around. It’s important that CEOs personally communicate with as many employees as they possibly can. They will learn a lot about the organization, and at the same time, they are encouraging people to bring things up. You’ve got to have a culture where employees know that we want to hear these ideas, we want to pick some up and move with them, and we also want to reward people for having created an innovative idea.
Be open-minded. If you’re open-minded, you will see a lot of ideas that larger companies don’t get an opportunity to look at because they have a very regimented and bureaucratic structure. To be innovative, you have to listen to people. If you’re myopic, then you won’t see what’s happening around you both within your organization and externally.
A lot of innovation can be customer-driven. If a customer sees improvements or sees potential ways to improve your product or recommends a new product to you, you’ve got to be listening to that. A lot of innovation is driven by being open-minded and having a reasonably flat structure where people can communicate effectively.
We foster the idea internally with people externally that we are looking for new games and ideas and anybody can propose them and they can communicate with the executives about it. Your idea might get shot down … but the environment and the culture is such that we want to hear those ideas. I think the biggest driver behind innovation is solving real problems. You’re creating a better product or experience for consumers.
HOW TO REACH: Zoo Entertainment Inc., (513) 824-8297 or www.zoogamesinc.com
When Michael LaRosa took over as CEO of his family’s 64-restaurant pizzeria chain in 2008, he couldn’t just rely on the quality of the pizza, hoagies or calzones to get him through.
The economy was bad, and people weren’t eating out as much as they used to, and that included stops at LaRosa’s Pizzerias, which his father founded in 1954.
“It has been an extremely difficult economic period to lead a business and organization in any industry,” LaRosa says. “What I look at in my role as CEO is that I have to do my very best to keep the morale and the culture of the organization from my leadership as positive as possible and try to encourage everyone to keep doing the right things.”
Due to the economic climate of the last few years, LaRosa has had to stress more than ever the importance of making customer service his highest priority. From driving service into the corporate culture and training new employees to modeling expected behavior and learning from mistakes, LaRosa’s has survived the economic downturn with great customer service from more than 2,800 employees who helped the pizza chain earn revenue of $124.5 million in 2010. Here’s how LaRosa kept customer service his No. 1 priority.
The economy the past few years put a dent in how and where people spent their money. When economic climates change, you have to be able to adjust to those changes and make sure you continue to do what you can to provide the best for your customers.
“People are doing a little bit less of some of the things that are life’s luxuries,” LaRosa says. “You wouldn’t think that buying a pizza falls into the luxury category, but people decide to eat at home a little more often and try to save some money, and at the end of the day, everybody feels it. Even though we are all doing our best to manage costs and waste and making sure that we have efficiencies everywhere, at the same time, we can’t let the economic feeling be prevalent inside our business, because we are in the customer service business.”
When times are tough, you can’t let that trickle into your business. It is crucial that you be as positive as possible and continue to focus on providing the best products and services to your customers.
“You must keep your eye on providing your guests great quality products and great service and you can’t allow a dip in attitude throughout the leadership of the company or your store management teams or your front-line people,” LaRosa says. “You just can’t allow for that because there are already fewer people calling and coming in and the ones who are coming deserve the most fantastic experience ever each time they come in. I think anybody who has been in a leadership position certainly has sensed the importance of doing a much better job just keeping your people positive, keeping your eye on the ball and inspiring them each day to do the best they possibly can with the guests that they’re serving.”
It is also important that your people understand the company goals during trying times. Setting goals and making strides toward achieving them can provide a boost in morale when times are tough.
“If you have important goals clearly stated and understood by everyone and you proactively review those metrics on a frequent basis, you celebrate the things that are worth celebrating and you address the other issues, I think that activity can help lift everyone’s spirits and morale,” LaRosa says. “You have to have the right goals established and be communicating them to everyone and then have frequent reviews so that you can respond positive or negative as you need to.”
Make training a priority
Regardless of what the focus of your company is, it is critical that all of your employees understand it and that they know it from the moment they begin work.
“What you try to accomplish within the first 30 or 45 minutes is to create an expectation that is simple to understand, yet extremely important,” LaRosa says. “For us, we focus on our promise. Our promise each day is that we want to bring a smile to every one of our guests every time we serve them. Our promise is clearly stated and easy to understand, but in that first 30 minutes, you want every new addition to your team to understand that.”
When showing new employees what you expect of them, it is important that you are able to view the situation from their perspective and make them feel comfortable.
“You need to understand the team member’s perspective,” LaRosa says. “I’m hiring people and sometimes it’s their first job. They’re very nervous, and they’re fearful of what they are going to encounter. We work hard to understand the nature of our new hires, and we try to create an environment that’s comfortable for them.”
Making sure that new hires are comfortable will help ensure that they will be able to grasp what you expect them to do in their roles. What you tell them in the beginning of their training is crucial.
“You have to be very understanding of the individual you’re training so you can design a program that not only meets their needs but helps them be successful beginning with the first 30 minutes of their training,” LaRosa says. “I think sometimes people make the mistake of using a little too much corporate language and acronyms and they blow right past the new hire and the new hire isn’t comfortable enough to ask what that means. You have to understand your target and create an environment that makes them comfortable especially when asking questions or asking for clarification. If you’re able to do that, there’s a pretty good chance you’ll provide pretty good training.”
Excel at customer service
In just about every industry, customer service is one of the top priorities within a company. If customer service is something you pride yourself on, it is important that you are constantly providing it in every circumstance.
“Regardless of how pleasing the meal may or may not have been, service can mean more to the guest,” LaRosa says. “They will continue to go back to a place where maybe the food is a little bit inconsistent, but service will bring them back because they feel appreciated. Customer service has to be prevalent everywhere. You can never overuse it. It has to become an integral part of your culture.”
To make something an integral part of a company culture, the behavior has to be displayed by the CEO and everyone else will follow.
“The CEO is expected to lead by example, and then that just trickles throughout the organization and everybody else is expected to behave the same way,” LaRosa says. “If you do that 110 percent of the time, chances are your people are going to be doing it pretty well, too. You also have to make it prevalent. Refer to it and point to it constantly.”
Feedback is another great way to improve upon your services. It provides a firsthand opinion of what you can do better to make your customers and your employees happier.
“You have to make it easy for your customers to give you feedback and you have to respond to it,” LaRosa says. “The same thing goes for your team members. All levels of management need to constantly ask their team members for feedback. Is there anything that we need to do or provide you to help you do your job? Are there any obstacles that I can help remove so you can do a better job providing quality products and quality service? You have to always be out there asking for feedback that can help drive your improvement.”
Getting feedback from customers and employees can often lead to new practices, products or services that can provide a boost to your company.
“It’s always fun to use specific suggestions or recommendations that are made by front-line team members and build that into the company,” LaRosa says. “Those things are huge wins. Those kinds of things have to be free flowing. You have to have a culture that allows everyone to come up with ideas that will help make things better, save time or steps, make something more efficient or help make a customer more satisfied, those contributions are invaluable.”
Contributions from employees or customers will only improve your business if you are open to those suggestions. It is imperative that you hear all feedback and respond one way or the other.
“You have to be open to all comments and suggestions,” LaRosa says. “However, you have to have some sense or some sort of an evaluation process where you can put something into a test mode and determine if this is really going to be something that improves this, that or the other. It’s like a funnel, you want to be open to all ideas and all suggestions, but what actually comes through the funnel are things that maybe a subcommittee or a quality team has reviewed.”
Motivation to perform well and recognition of a job well done is an important part of creating an atmosphere where employees will want to excel.
“Somebody taught me a long time ago that when you catch someone doing a great job you need to make a big deal out of that and let them know that you appreciate that,” LaRosa says. “As much as possible I’ll visit a store and congratulate and thank a team member. That recognition of a job well done is very important and we try to share those stories.”
A job well done must be celebrated from the top down. Otherwise people won’t know that your company cares about good performance.
“Our team members see that as our attitude and that helps draw out the best in people,” LaRosa says. “If it was the opposite of that and no one cares and that’s the attitude, then that will trickle down, as well. As CEO, it’s really important to make sure that your managers are doing the right things and they care and are responsive to their employees.”
Managers must make sure they are providing encouragement in the right manner, because employees will respond positively or negatively based on how they are treated by their supervisors.
“What’s most important is having a culture where the managers care about their team members and their satisfaction so that your team members care about the guests and their satisfaction,” LaRosa says. “It’s a two-way street. Your team members are only going to perform at a level of how they are interacted with by their superiors. You’ve got to have an environment where everybody understands that a happy internal customer is going to provide for that external customer. So the culture and the environment have to be one that you care about your people at all levels.”
To build a culture that cares about people and motivates them at all levels, you must be able to learn from mistakes. If your company can do that, everyone will be better off having learned from those experiences.
“You have to have continuous learning and process improvement that’s driven from that learning,” LaRosa says. “That’s a very important way to motivate people across the organization. Leadership is charged with the responsibility to create that urgency around improvement. Complacency is the enemy. There are always little details that can get better and be improved upon. As a CEO, you have to create that type of environment.”
HOW TO REACH: LaRosa’s Pizzerias, (513) 347-5660 or www.larosas.com
The LaRosa File
Name: Michael LaRosa
Company: LARosa's Pizzerias
Food service experience: Has been in the food service business for more than 35 years working in and around the family business. His father started LaRosa’s in 1954.
Do you hope that your children will continue the family business?
My oldest son is involved in the company, and he is very passionate about the family business. But it’s really up to them. I don’t think it’s something you want to force upon them. It has to be a decision that they want to make for the right reasons.
What would you eat if you went into a LaRosa’s for a meal?
I would have a bowl of minestrone soup, a traditional crust pizza with pepperoni and sausage and a Diet Coke.
What are some traits of a good leader?
I think you have to be a person of integrity. You need to have vision. You need to be a servant leader and go out of your way for others and be as concerned about others and their development as you are yourself. You also have to be passionate about what you do.
If you could have a conversation with a person from the past or present, who would you like to speak with?
I would probably speak to Jesus Christ. I think you could have a pretty interesting conversation with him. I have a strong faith, and he is one of the people I most admire.
Charles Hammontree believes in following his leadership instincts and giving his employees what they need to succeed. His instincts have been leading Hammontree & Associates Ltd., a civil engineering firm, for many years now. Through his experiences and his success, Hammontree, president and CEO, has helped the 51-employee firm continue its steady growth.
“As I mature in this position, my instincts seem to be paying off,” Hammontree says. “Part of it was seeing some opportunities that competitors didn’t see and delivering a service and expertise on a level that’s hard to match.”
The combination of his leadership instincts and his company’s ability to follow his lead and back up his plans with results has proven successful and led the firm to their best year yet in 2010.
Smart Business spoke with Hammontree about how to successfully grow your company.
What can a leader do to differentiate their business?
Don’t follow the crowd; follow your own instincts. Find out what the crowd or your competitors are doing and do something different or sometimes do the opposite. If they’re going after one market sector and they’re all competing and the odds are low that you’re going to make an impact, go to a different area and find another source for your services. Go where the probability is better that you’ll succeed.
How can a leader of a company help its staff be successful at their jobs?
You have to lead by example; you can’t just talk. You can’t just tell people what to do. You have to go in when something’s hard to do, and [employees] have to see that you’re willing to do what’s hard for the benefit of the firm and the group. You’ve got to be responsive to your team, and if there’s something that they need to succeed, you have to see that they get it. I like to give all my people the tools to succeed rather than have any excuses not to. My staff comes to me with recommendations and my philosophy is to say yes and give them what they ask for more so than to say no. I trust them and put the onus on them to deliver with what they think they need to succeed, and more times than not, that pays off and we get a return on those investments.
What are ways to grow a business once it is doing well?
If I have a section or a sector of business that’s doing well, I like to use our resources to reinvest into that sector and make it even stronger. I will invest some resources in less profitable sectors but not the lion’s share. You don’t want to use your resources to invest in something that’s less likely to have an immediate or even a long-term return on that investment. What you’re doing well in, you should keep doing and keep investing in and play on that strength. Focus on what you do well and invest in that and do more of it and do it even better and expand on it rather than trying to beat the dead horse with something that’s struggling.
How can a business plan for growth and new possibilities?
As the CEO you have the overall picture. You have to bring your team members together who have different parts of a solution to a new offering. You have to build confidence in the staff that they can deliver and approach that market. It’s about networking your own team members and having the overall picture. You have to think about bringing in good capable people who like to work and like the work that you have for them to do. If you can get those two ingredients, that’s a good formula for success.
How can a CEO keep in touch with employees as the company grows?
Let them know you’re involved and part of the team. Keep in contact with your staff. It’s all one family and you’re all part of the same team. You have to be visible and you have to have an open-door policy. You can say it and you can encourage it, but I think the average staff member is still a little intimidated. They don’t want to fall in disfavor with the CEO or the boss. You have to let them know that you’re there to make them happy. Even if they can’t physically walk through your door they’ve got to know they can call you anytime or e-mail you and you’ll be responsive to them. Just like a project manager has to be responsive to his customer, a CEO has to be responsive to his staff.
HOW TO REACH: Hammontree & Associates Ltd., (330) 499-8817 or www.hammontree-engineers.com
As a pilot for 43 years and president of Voyager Jet Center, Rich Ryan knows what it takes to create excellent customer service.
Ryan leads by example and demonstrates the level of effort and commitment it takes to deliver the customer service that Voyager Jet Center, a private aircraft company, is known for.
“I think when the employees see the president pitching in, whether it’s picking up a piece of trash, flying an airplane or cleaning something, I think they know that I’m committed and therefore they should be committed,” Ryan says.
Attention to detail by all 60 of Voyager Jet’s employees allowed for $25 million in sales last year.
Smart Business spoke with Ryan about how he keeps customer service the focal point of his business.
How do you keep your employees motivated?
I’m a walkabout manager. I am in every department every day observing, showing my face and asking people how things are going. That’s a management style that’s worked well for me. Make yourself visible. Make yourself visible to the customer and to the employee. Don’t hunker down in your office, get out and about.
I also have an open-door policy. People aren’t hesitant to speak with me, because I see them every day. If you’ve ever been to a presentation by a senior executive to his staff, at the end invariably the lecturer will say, ‘Any questions?’ and people are reluctant to speak openly. So the follow up is, ‘If you have any questions that you don’t want to say now, I’ll be available in my office for the next half hour and you can talk about it.’ If I address the employees as a whole, I usually end up in that arena. Some people just don’t speak well in front of a group of people, yet they may be perfectly lucid in a one-on-one conversation.
How do you create and evaluate customer service?
Training is one way to keep the quality of service up. Voyager Jet Center spent roughly $650,000 on employee training last year. Most of that training was simulator training for the pilots, but we also train our dispatchers and our line service personnel. As a company, we sell several types of products, so our line service personnel need to be trained in safe and efficient service.
A lot of the customers are my friends or associates so I will call them and ask them or send them an e-mail and ask, ‘How was your trip last night?’ By constantly evaluating what our service is by getting feedback from our clients, we hope to improve our service.
We have evaluation forms … for the pilots to fill out who come in and buy fuel from us or use our facilities.
For employees, we have a standard evaluation process. I’m a big believer in the sandwich technique, the good the bad and the good. So I would say, ‘Mark you’re doing a great job; however, you’ve been tardy three times in the past two months, so once you correct that, overall, you’ve done a good job.’ Evaluating progress is critical. Otherwise the employee would be operating in a vacuum.
How do you improve customer service?
Listen to what the customer says and listen to what the employee says. The employee knows more about his job than you do, so listen to him and then react.
Make sure that you involve employees in the decision-making process. Push decision-making down and make sure that each employee has bought in to the goals of the company. Employees need to understand what the goal of the company is, and they need to buy in to it. By involving them in the decisions, it becomes their decision, not your decision.
How has customer service helped grow your business?
We sit in one airplane every week. We sit in it for several hours, and we open every drawer and open every table and look in every nook and cranny to make sure it’s clean and that some old magazines haven’t gotten in there. That’s very important to us.
People talk about what’s a good restaurant or what’s a good tailor and who’s a good jet provider. Who can you rely on, who’s safe? So if you have a cadre of happy customers, then they’ll tell their friends, and that’s an important manner in which to build the business.
HOW TO REACH: Voyager Jet Center, (412) 267-8000, or www.voyagerjet.com
Vincent Delie Jr., CEO of First National Bank of Pennsylvania, managed to lead his bank through a time when business-as-usual was anything but usual. Not only did Delie and FNB survive the worst of the recession, but he found ways to grow the bank, especially in its biggest region, Pittsburgh.
“There were quite a few obstacles,” Delie says. “It seemed like every line item on our balance sheet was being challenged one way or another. There was quite a bit of concern not just with our institution but across the country in regard to how we would fund ourselves moving forward.”
Growth during a downturn is a rigorous task and one that takes time and persistence. Delie looked to the talents of the bank’s 2,300 employees to tap into opportunities in the marketplace to take the company into unchartered waters. Those initiatives helped the bank see revenue of $369.9 million in 2010.
“In this market, you can see that the companies in western Pennsylvania seemed to have fared better through the recession, because they’ve had a lot of practice over the years,” he says. “We’ve had some very difficult times here where we’ve been hit harder than the rest of the country during more mild cyclical declines.”
The good fortune he has seen was no accident; it took hard work and strategic planning by Delie and his employees to push through. Here’s how Delie took advantage of new opportunities to get FNB through the downturn.
FNB found itself in a pretty strong position during the toughest period of the economy. Superior credit quality metrics, flexibility and a conservative investment policy helped FNB refocus their attention to areas where growth could be possible.
“Because we were a true plain, vanilla commercial bank, we were able to ride through [the recession] with less disruption in our own balance sheet, and ultimately, that resulted in better earnings throughout the period,” Delie says. “We have a fairly conservative investment policy, so we didn’t get caught up in some of the toxic investments that others got tied up with. That gave us a little more flexibility.”
Delie and his management team had the insight to forecast for a declining loan demand and prepared themselves for what would need to happen to change their approach.
“We had the challenge of growing our balance sheet during a period when outright demand was diminishing,” Delie says. “There were challenges on many, many fronts and they weren’t just challenges for FNB, they were challenges for everybody in the marketplace.
“You need to challenge your employees to think about ways to continue to generate revenue even during a very difficult period. You need to be upfront and honest and communicate very well with your employee base. You need to understand what your clients’ needs are as you move through that cycle.”
Sometimes customer needs will change, so be willing to adapt. This requires a collaborative management team.
“You can’t have silos within your company,” Delie says. “Everybody has to be working together to drive shareholder value and to focus on the bottom line. You can’t have one division just focused on what they do exclusively. They have to be communicating with the other areas.”
During a time when companies see their most important lines of business diminish or even disappear completely, they have to quickly respond. Companies must look at alternative ways to stay in business.
“As commercial clients manage their finances through the cycle, I would stress that cash is king, liquidity is very important,” Delie says. “During periods of time when the economy is contracting, good companies reduce inventory levels, they build their cash position, they delay (capital expenditure) spending and they manage their balance sheet appropriately. I think that if a company is struggling, that should be their focus. Their focus should be to drive liquidity.”
When the economy changes the way you have to do business, it is crucial that you act quickly to implement new ways of gaining business. Communication during that process is also critical in making sure plans don’t fall through.
“We have meetings continuously to talk about the challenges that are going on in the environment and within our own organization,” Delie says. “We focus on those items as often as we have to. Communication within the company is critical, particularly during a period when business isn’t normal — it isn’t business as usual.
“You have to have a system where you can elevate issues or ideas and discuss challenges in the marketplace. We’ve institutionalized that within the company and how we interact with each other. I think you become a little quicker and more nimble when you have that.”
It’s always easy to identify what needs to be done, but actually doing those things takes time, work and people who understand the direction the company needs to move in.
“You need to clearly communicate,” Delie says. “You need to correlate what’s required from a production standpoint from the employees to the ultimate financial plan of the company. They have to understand even though they’re a small piece of the total equation that their contribution is needed and is necessary and we are relying on them to get us home. Making sure they understand how their little piece fits into the total picture is probably one of the most important things. You have to also provide the appropriate incentives to make sure that they achieve or exceed those objectives. Recognizing success within the organization and sharing victories pays dividends.”
Delie quickly realized that the customers they currently had were priority No. 1. Repeat business is vital no matter what state the economy is in and attention to customer satisfaction is what keeps them coming back.
“It’s one thing to build your customer base, but you have to maintain what you have,” Delie says. “Going through a very disruptive period like we just went through, keeping in touch with your customer base, making sure that you’re serving their needs, making sure that you’re listening when they’re bringing up issues or they have concerns about the industry or a particular product is critically important.”
Implementing ways to gain feedback from customers is an important way to find out what they like and don’t like about your company and your service. Retention rates will not rise if you don’t know how or where to address problems.
“You have to put in a way to measure the satisfaction of your customer base,” Delie says. “That has to be built into your incentive comp planning. It has to be built into the culture of the company. You have to have a way to measure it.
“We came up with a methodology for measuring satisfaction across a bunch of customer areas so we could benchmark ourselves against a baseline result. You have to be able to measure that and ingrain it into the culture. Making it an important factor is critical to gaining success.”
Having a system in place that can tell you exactly where improvement needs to happen will greatly increase your customer satisfaction. If customers are not satisfied, change needs to occur.
“You have to get to the root of what’s causing that dissatisfaction,” Delie says. “That requires reaching out to customers. You should also sensitize your employees and incent them to bring forward process change that creates a better environment for providing the service. Those are the things you need to do to drive change.”
Take advantage of opportunities
Once Delie addressed the issues that would help stabilize the bank, he started looking for other avenues to grow and expand their reach. During a tough economic time, it’s important to not be one-dimensional.
“We are not in a high-growth market,” Delie says. “For us to grow in a market that isn’t a high-growth market like other areas of the country, we had to focus on niches within the marketplace that we compete in where the growth is growing at a faster clip than the overall market.
“You have to study the market that you’re competing in. If you see a particular niche where you feel there’s going to be more robust activity, where there’s growth that outperforms the overall market, then you can benefit from that if you focus on it. That’s what good companies and good management teams do.”
Relying on what got you growth in the past will not help your company grow to new heights. You have to constantly reinvent yourself and be thinking of ways to refocus and re-engineer.
“I think a lot of companies during a period of economic turmoil or downturn, they tend to become paralyzed,” Delie says. “They just cut expense and cut expense and they really don’t think about how they are going to continue to manage the top line through that process. That is something that needs to be focused on.”
Delie focused on areas where he saw room for growth and revenue and reallocated resources to go after those areas. Companies must commit to their growth strategies completely in order for them to work.
“We beefed up,” Delie says. “We didn’t pull back like other institutions. We actually added people and developed certain departments. The other thing we had done was focused our people on cross selling. We didn’t want to just push products to clients. We coached them to be more holistic in their approach to providing financial solutions. If a company has a particular need or is looking to mitigate a risk, maybe the insurance company can provide a product or service that helps the company accomplish their objective, and we win by getting that business opportunity.”
Along with finding niches that can help you grow during tough times, new markets can also offer unchartered growth opportunities.
“We are always evaluating our plans,” Delie says. “You have to look at the opportunities that exist in the marketplace. We had to focus on new client acquisition going into the downturn. Our incentive compensation, our strategies were all geared toward going after market share during a period when many other banks were hunkering down or evaporating. That’s what’s led to our growth and our success during a period when outright demand diminished.
“If we are looking to open a new branch, there’s two ways to look at it. One is to try to anticipate what the opportunities are within that micro-market and the other is evaluate whether or not it will be supplemental to your overall delivery channel. You have to look at the market itself that you’re looking to move into and whether or not that move provides support to the rest of the infrastructure. You start with where the customers are and who you are trying to reach and why. Those are the questions you ask yourself.”
Once you identify niches and new market opportunities you need to plan and staff accordingly for growth in those areas to be successful.
“We focused on where the best opportunities were in a particular segment and we staffed that area appropriately to go after the opportunities,” Delie says. “We are in a people business. Even during a cyclical decline, particularly one as severe as what we just went through, where other financial institutions were falling by the wayside, there was a lot of disruption in the marketplace. We were able to capitalize on that, because we had staffed up with good commercial bankers from much larger financial institutions. We upgraded our talent during that time; we didn’t just cut bodies. We looked for ways to become more efficient in the company, but we also hired at the same time to continue to drive growth. Bringing those people in and retaining them was key to our success. Everybody needs to pull their weight to make the overall company successful.”
HOW TO REACH: First National Bank of Pennsylvania, (800) 555-5455 or www.fnb-online.com
Vincent Delie Jr, CEO, First National Bank of Pennsylvania
Born: Philadelphia, but grew up in Pittsburgh
Education: Penn State University, degree in business administration and finance
What was the very first job you ever had and what did you take away from that experience?
The first real job I ever had was stocking shelves at a drugstore on the north side of Pittsburgh. It taught me quite a bit about business. I was able to get involved in a variety of tasks.
What is something that you enjoy the most about your job?
I enjoy interacting with people — that’s the most fun. I also enjoy celebrating success and being a part of the celebration.
What is your favorite piece of U.S. currency?
I would say a $100 bill.
If you could have a conversation with one person from the past and one person from the present, who would they be and why?
I would want to talk with George Washington. I would want to know what his thoughts were about the country back then and where we are today and compare and contrast. Today, I think it would be interesting to have a conversation with Hugh McColl from Nations Bank. He had great success and I would like to talk to him about how he constructed what he constructed and what he was thinking along the way.
Oct. 27, 2009, wasn’t the happiest of days for Darron Anderson.
It was the day his company, Express Energy Services, filed for Chapter 11 bankruptcy protection.
But for Anderson and the employees at Express Energy, it was far from the demise of the company; it was a rebirth of sorts. In just nine weeks, the company emerged from the reorganization prepared to do better than before.
“Emerging out of Chapter 11 on Jan. 1, 2010, I would say by the end of Q1, the Chapter 11 process was pretty far in our rearview mirror,” says Anderson, CEO of the $300 million oilfield services company. “I always tell people I have the greatest job in the world. Since taking over as CEO in the end of 2008 in a very, very depressed market and leading a company into a Chapter 11 process and successfully leading a company out of that process and now watching the company grow and flourish. It has been such a wonderful environment.”
A bankruptcy doesn’t create what most people would consider a wonderful work environment, but Anderson and his 1,475 employees survived the process and have gone on to good results.
Here’s what he learned along the way.
Communicate key messages
From 2004 to 2008, the energy, oil and gas industry enjoyed a stretch of very profitable years. In that same year, Express Energy Services was in the process of being acquired by an outside capital group. When the transaction took place, any additional debt was leveraged to complete the deal. That process, combined with the condition of the industry, is what put the company in Chapter 11.
“The business couldn’t support the new balance sheet and the industry had fallen off so drastically, there wasn’t going to be any help from the marketplace,” Anderson says. “It was pretty clear early on, even with the new owners, that Chapter 11 was the process that needed to be taken for the benefit of the organization and the people of the organization.
“From an internal standpoint … I think one of the best things we did was hiring a public relations firm that helped us craft messaging not only from an external standpoint but an internal message.”
While the natural inclination when times are bad may be to withhold information from employees, Anderson didn’t do that.
“We took the exact opposite approach,” he says. “We kept our employees up to speed from day one. We did that with phone communication, conference calls and site visits to let the employees know we were going through Chapter 11. We had to let them know what that meant to them personally, what it meant for their jobs and giving them the security that it was going to be business as usual. That ultimate communication we had with our employee base was one of the things that led for a successful emergence from Chapter 11, because our internal team was involved in the process and really supported the organization. That external communication and … internal communication were the keys for the success.”
When facing a problem as challenging as a reorganization, there will be a number of things calling for your attention. You need to figure out which ones should be dealt with first to give the company the best chance to succeed. For Anderson, one of his top priorities was to develop more of a team atmosphere.
“Express was a very entrepreneurial company,” Anderson says. “With an entrepreneurial company, you have a lot of individual initiative, individual attitudes, and one of the biggest issues was that Express should be about the company, not about the individuals.
“As an organization we had responsibilities to our employees, our vendors, our shareholders and to the public,” says Anderson. “As a result, there were a significant number of changes that occurred early on in the process. Some were painful changes, but we had to say, ‘Although we’re making short-term sacrifices, we know that they will set up the organization for the long run, and we are going to have a solid team that is 100 percent supportive of our organization and materializing our five-year strategic plan.’”
It is critical that executives of companies facing these types of issues communicate each step of the process to create a smoother transition.
“You have to talk to your people,” Anderson says. “You can’t accomplish everything overnight. That is something I personally struggled with, because I’m very driven, very competitive, and there are things that you want to change, things that you want to put in place and things that you know can bring great benefit to your organization. You have to listen to your team around you and as a group decide what are the priorities and remember whatever your horizon is, it’s not all going to be done overnight.
“You cannot overwhelm the organization. You cannot create too much change too fast. What you can do is listen to your organization, listen to your team members and turnaround and act upon what they have said and make sure it’s clearly visible that you have reacted and get their feedback to your reaction. What happens is, the organization realizes that they have a voice and that management is listening to them and management took action and they see a positive behavior. What it breeds is the next initiative or the next decision is that much easier and accepted and before you know it, it becomes an environment, it’s a culture. It’s a culture of getting feedback. It’s a culture of taking that feedback and making the best decision and putting things in action and seeing the success of that.”
Create a plan
Getting the right feedback is critical during a turnaround but making the right decisions and having a plan for action is even more important.
“We sat down as an executive leadership team, and the first thing we did was went out to our operation-level managers who have the most day-to-day interaction with most of our employee base,” Anderson says. “We asked them specific questions regarding what we do well as a company. What we can improve upon as a company? What are the issues you deal with on a day-to-day basis with your employees? What are the things your employees are coming to you with? We did a very detailed survey process, and we took in information and then spent the better part of a week just combing that information and really seeing what our organization had to say about our current condition.
“Then we looked back and said, ‘If this is where we are today as perceived by our organization, where do we want to be in five years?’ That really started to develop the strategy of our five-year plan. We took where we were and asked ourselves, ‘What do we all think the ideal Express looks like in five years?’”
From that process, Anderson and his team developed several key areas of focus, including financial performance, employee retention, safety performance, customers and how customers view the company.
“We asked ourselves, ‘What must we get done in the next 12 months? What must we get done in the next two to three years, and what do we need to get done within five years?’ That is so far from where this organization was two years ago — that was very short-term focused that the only metric was a financial metric. Now we have so many other metrics and we know that if we perform well in all these key elements of the business, the financial performance is going to be there.”
Unify the team
It is critical for companies that are going through change or restructuring to not send different messages to different areas of the business.
“If you’re going to have any change, you have to be unified,” Anderson says. “We spend a lot of time discussing, analyzing and critiquing different issues. We don’t always get immediate buy-in at the first meeting or even the second meeting. After everything has been discussed, it is very important that the leaders of your organization are delivering the same message, because you don’t want your employee base to get confused. You don’t want your employee base to think that they are expected to perform a certain way here, but if they go over there, they are expected to perform a different way. In doing that and delivering a common message and getting all of your employees bought in to it, now you can take out the message to your customer base.”
A turnaround creates a lot of change within a company, and it is imperative that employees are willing to follow new plans in order for a turnaround to be successful. There is no room for resistance.
“It’s very important to give the naysayers an opportunity to get on board and give them a full chance to make sure that they understand the message and direction,” Anderson says. “When you go through things like this and people just haven’t done it before, there’s always a lot of fear, and fear is going to bring on some level of resistance. You have to be patient with individuals and make sure that they have all the knowledge and the correct knowledge. A lot of times, the information they have been told or possibly heard is incorrect. It’s important that they understand what the facts are and what the truth is.”
But once you’ve gone through the education process and they have all the facts and have had an opportunity to ask any questions and are still choosing not to get on board, at that point, you have to make a decision.
“At that point in time you have to ask yourself, ‘Is it better for this person to remain in the organization with potential negativity or with hesitation?’ I would bet most CEOs would say that’s something that they cannot have is a person not fully supportive of the organization. Whatever short-term pain that may create, it’s better for the long term and it definitely pays off.”
Anderson and his team looked for new employees who had experience with companies that were doing the things Express wanted to strive to do following their turnaround. “Entrepreneurial companies tend to have a level of drive, a level of can-do attitude,” Anderson says. “We had to balance that with individuals who came up in larger organizations, more professionally managed organizations and system processing organizations. That was an element we were missing. We rounded out a management team that has different experiences from different types of companies because we want to keep that element of an entrepreneurial attitude but marry it with a more professionally managed company and that has been refreshing and provided success for us.
“Part of the integrating process is that you cannot be afraid to communicate what you think some of the opportunities for improvement are within the organization. It is very difficult to say, ‘We just came out of a Chapter 11, and we are the best company out there, don’t worry about that.’ You have to communicate to [new employees] what you think the issues were that led up to it, what improvement steps you’ve taken and what you could expect they could provide to help the organization meet its long-term goals. You have to tell them that there is going to be change in the company, and we’re bringing you in to help with that change. “
Make sure the individual agrees with your vision and understands that flexibility is key.
“We know where we want to get to, but in getting there, there may be different paths,” Anderson says. “As we bring on people, we want them to come on with their experiences and values that they’ve had previously. You have to have that strategy as a CEO and be able to lay out to a new prospective candidate and be willing to admit that the organization is not 100 percent perfect and be willing to admit that we want and we need your help. Be willing to admit that it’s going to be challenging because it’s change.”
HOW TO REACH: Express Energy Services, (713) 625-7400 or www.eeslp.com
The Anderson File
Darron Anderson, CEO, Express Energy Services
Born: Corpus Christi, Texas
Education: Graduated from the University of Texas with a degree in petroleum engineering. He worked for Chevron right out of college and also started his own business in 1998. Through those experiences and the people he met and learned from, he says that’s how he earned his “homemade” MBA.
What was your first job and what did you learn from it?
My very first job was mowing lawns in my neighborhood at the age of 13. That really taught me the satisfaction and joy of being an entrepreneur. It also taught me to have a good work ethic.
What is the best piece of business advice that you have received?
What doesn’t get measured doesn’t get managed. I’ve taken that adage and used it tangibly to make sure we measure things that we want managed but not just making sure we measure them but making sure we communicate them.
Who do you look up to or respect most in business?
Jim Woods, the former chairman and CEO of Baker Hughes. Mr. Woods was on the board of directors of the first company that I sold, and he has been a great mentor. You look at a company of the caliber and size that he ran and to be able to have him give you advice about how he looked at things was totally invaluable. He is the person I’ve learned the most from and have the highest respect for.”
If you could do something dangerous one time with no risk at all, what would it be and why?
I am not a racecar fan, but I would want to try driving a racecar in an actual race. It requires split-second decisions, you’re moving extremely fast, there’s a side of gut feeling, an amount of technical know-how and that would be an amazing experience.
Every industry constantly searches for the next thing to alter and improve how business is done. For Houston and the energy industry, that thing is clean technology. Lisa Epifani, an expert in the energy field, explains how it is bringing change to the energy capital.
Leading the energy industry
Houston will be a great leader in the clean tech world. Texas is super lucky to have great resources for wind and solar energy, and Texas has been harnessing those newer and renewable resources.
Clean tech versus oil and gas
It’s obvious that oil and gas are going to be a major part of the portfolio for a long time. We have to acknowledge that and be realistic about the tradeoffs as we transition to cleaner and cleaner fuels. Houston is positioned well, given its knowledge of the energy industry and its geographical location. Texas is a very attractive location for a number of headquarters. Houston is an attractive place for companies to come with its lower taxes and larger labor base.
Regulation in the pipeline
EPA regulations are coming down the track requiring cleaner energy. Companies are going to have to find ways to meet their production demands using cleaner technologies.
Oil and gas companies accept the reality that our economy is turning toward more carbon constraint. The traditional oil and gas companies are going to start making investments in clean energy, particularly as we see tax incentives, different policies, or perhaps something like a national clean energy standard calling for a greater use of those. These companies have money to invest in the energy industry and are going to position themselves to play across the full spectrum of resources.
Oil and gas are still boss
There is going to be a continuing demand [for oil and gas] for a number of years. I don’t see [clean technologies] as competing, I see them as offering a layer to the cake in the foundation of our oil and gas tradition and now we are going to improve on that with these cleaner, newer technologies.
It’s not a matter of one part knocking out the other but blending in a way that makes sense from an economic point of view, security point of view and from an environment point of view. It’s an exciting time in the energy industry and things are improving and it’s a matter of phasing in newer technologies in a smart fashion.
HOW TO REACH: Van Ness Feldman, (202) 298-1800 or www.vnf.com
Van Ness Feldman
About: Lisa Epifani is a partner at Van Ness Feldman and advises a range of clients on energy and environmental matters, with a special focus on climate change strategy, oil and natural gas issues, nuclear policy, and financial regulations. Her clients include industry coalitions, financial institutions, oil and gas pipelines and think tanks. Before joining the firm in April 2009, Lisa spent 10 years serving in key governmental and business community roles, developing energy policy and strategy. She was appointed assistant secretary at the department of energy for congressional and intergovernmental affairs by then-President George W. Bush.
In December 2008, William Toler arrived at Pierre Foods Inc. as its new CEO. A food industry veteran, Toler was hired to help the company get through the immediate crisis of facing Chapter 11 bankruptcy protection and then finding ways to make the company stronger moving forward.
“I was first attracted to the opportunity, because Pierre was a supplier to my last company and I knew that the products the company made were excellent and the team here was, largely, very good,” Toler says. “Obviously, there were some things that had caused them to go into bankruptcy, but they were pretty fixable.”
In a twist of fate, the four members of the new leadership team all ended up living in the same hotel when they moved to the Cincinnati area.
“The four of us were relocated here at the same time and we ended up living at the same hotel for a year,” Toler says. “So we found ourselves working out together in the mornings, working all day together then going to dinner and talking about the business from 6 a.m. to 11 p.m. four or five days a week. It really helped to create core camaraderie among the senior team that still exists today. So the fact that we were all relocating here at the same time and ended up living in the same hotel really gave kind of a dawn-to-dusk platform to discuss the business and get to know each other at the same time.”
And with the company facing several challenges, the extra time was a plus.
Pierre Foods’ struggles, while difficult, were not too severe that the company would never recover, and Toler knew that when he took over as CEO.
“You have to make sure you know that you have a good company under the problem,” Toler says. “Is the company the problem, or is the problem the balance sheet? In this case the problem was the balance sheet. It was a fundamentally good business inside of the problem, and a lot of times, it’s not. Make sure you’re doing the due diligence and the assessment upfront to make sure you’re going into a business that can be fixed. Does it have the fundamentals to be fixed? Is it a business that’s cyclical with the economy? Is it one that has a real competitive advantage that can be leveraged? Or is it a business that’s just a problem? In the case of Pierre, it was a strong business that had some unfortunate things happen to it all at once. I knew that we could get in here and fix it because it was a fundamentally good business underneath.
“The kind of business that you’d want to avoid is one that has parts undifferentiated or where you are in a commodity business where one product can be replaced easily for another that customers don’t value. That would be a problem or scenario that you’d be hard-pressed to go in and fix.”
Unprecedented inflation in the food industry in 2008 left Pierre without the systems, analytics or tools to understand how that inflation affected its products.
Toler’s first priority was to fix the obvious problems.
“They didn’t really know what the profitability of their various items or the profitability of their various business segments were,” Toler says. “They were unable to properly price the business to make sure they stayed up with inflation as that hit in 2008.”
Oftentimes when a new CEO takes over a company, the amount of data needed to successfully right the ship or move in a new direction is unavailable.
“We had quite a bit of limitations on data here,” Toler says. “We didn’t understand our profitability by item. We brought in an outside firm who developed a profitability tool and model for us that we still use today that essentially allowed us to understand the profitability by item. We also didn’t have all the plants on one ERP, so we moved all the plants to one ERP and got common visibility and common information across all the items. That allowed us to understand where we made money and where we didn’t and be able to take appropriate pricing and be able to work constructively to make sure that we knew what businesses to stay in and what businesses to get out of.”
Data is usually available; it just usually isn’t pulled out of the system in an effective way that leaders can use. Companies with data issues need to mine the data and then get a plan in motion to fix the problems they find.
Besides a lack of data, productivity was also an issue.
“The other thing we identified when we first got here was the idea that their plants were very good plants, but they hadn’t been stretched to [maximize] productivity,” Toler says. “We immediately began focusing on improving the productivity of the plants in terms of how they operated and the number of people per line and the efficiencies of the plants and the waste in the plants and all the things that can cost money to businesses. Really, it was about getting visibility on pricing and also driving productivity. Those were the two things we focused on when we first got here.”
Pierre had also made two acquisitions that they were struggling to integrate. That challenge, along with the condition of the industry and the economy, served to be too much for the company to handle all at once. Faced with the challenges of lack of visibility in data, lack of integration of acquisitions, and lack of pricing, Toler had to prioritize each task in order to get Pierre back on its feet.
“It was all about knowing where you made money and where you didn’t,” Toler says. “Once you have those things in place, you are able to act pretty decisively. You prioritize in the places were there is the greatest payback. Where can you get the most return for your efforts? Is it understanding the data, is it in moving the ERP’s together, is it in pricing the business or in driving productivity? You look where you get the greatest payback and you put your efforts into that.”
Communicate your plan
Once you have determined where your problems areas are and what needs to be done to fix them, you have to communicate to all your employees why those changes are being implemented.
“The most important thing is to communicate [your plan] internally so you make sure people understand what you’re doing and why,” Toler says. “We did everything from e-mail communications to town-hall meetings to plant floor meetings to conference calls and various other forms of communications. It wasn’t easy, but it was straightforward. It was something we knew we needed to do and something we had to get at right away. The one thing that happens in challenging situations is that people often don’t communicate enough, and we tried to be very upfront with folks and let them know where we stood.”
The planning process is a calculated, communicative process that requires collaboration with everyone on your team. There is no substitute for communication during planning.
“I think the thing we tried to do was talk to the people that were closest to the business,” Toler says. “You have to talk to people working the lines, the front-line salespeople, talk to the marketing team and understand what they thought were the issues in the business. One of the things I’ve always found is that when you have a problem in a business, you go to the problem. You try and find out how we can help. You put people out in the plants, you put people out in the field and you talk to the team and ask them what things they think need to get changed and what things could get better.
“Assess what you’re good at. Assess where your competitive advantages are and assess where your weaknesses are and then leverage your strengths and try and either strengthen your weaknesses or get out of them. Stop trying to do things that you can’t do and focus on the things you can do really well.”
This strategy also paid off for integrating acquired companies, including two recent ones made last fall.
“When most companies go in and do these type of deals they just take the home-teams approach and wipeout the other guys,” Toler says. “The most important thing to do is to listen and to defer judgment when you’re getting opinion from folks that are new to you. You shouldn’t automatically assume that your approach is the best approach, but you should listen and be open to each others’ ideas. That’s been what we have all tried to do. We believe you can find a better approach by listening to each others’ best practices versus just saying, ‘Because I’m doing it a certain way, that’s the best way.’ It takes a little longer and sometimes it’s harder, but generally you end up with a better outcome if you have the patience and willingness to do it.”
Toler’s solutions led to the company’s best performance in 63 years.
“Coming out of the bankruptcy, the strength of the first year results has enabled us to more than double the size of the company,” Toler says.
Pierre’s merged last September with Advance Foods Company Inc. and Advance Brands LLC, creating Advance Pierre Foods, double the size of the pre-merger organization.
Today, the company has $1.3 billion in sales and more than 4,000 employees, making it the largest privately held company in the tri-state area.
“Fixing the bottom line by productivity and pricing, staying focused on our core products and understanding how to merge two businesses together with us that strengthen us in our product lines and also strengthen us in our core channels have made us successful,” Toler says.
HOW TO REACH: Advance Pierre Foods, (800) 969-2747 or www.advancepierrefoods.com
The Toler File
William Toler, CEO, Advance Pierre Foods
Born: Raleigh, N.C.
Education: Graduated from North Carolina State University with a double major in business management and economics
Previous work experience: Procter & Gamble, Nabisco, Campbell’s, Pinnacle Foods
What was your first job, and what did you learn from that experience?
My very first job was as a swim coach and from that I learned that leadership matters. Trying to lead to inspire others is an important approach in business and in life.
What is the toughest challenge you’ve had to face in business?
The hardest thing is letting go of bad business. Getting out of bad businesses or getting rid of customers that you don’t make money on. That’s always the hardest thing, because people love revenue and sometimes they confuse revenue with good business. Getting out of business is hard and saying no to new ideas is hard. The trick is to not do the things that can distract the business.
What is your favorite thing about working at Advance Pierre?
It’s the quality of the people I get to work with. The way we feed off of each other and the things we do to challenge each other makes it fun every day.
What is your favorite Advance Pierre product?
My favorite product is our Graham Snackers, which are two graham crackers with peanut butter and jelly in between. They’re really good.