One day, Derek Glanvill was part of a construction industry that was achieving record growth. Seemingly the next day, the sector was caught in a downward spiral that appeared to have no bottom.
“Our industry doesn’t have 9 percent unemployment,” says Glanvill, president and COO at McCarthy Building Cos. Inc. “It has 20 to 23 percent unemployment in the construction trade. From 2006 to 2007, the construction economy was at its highest that it had been in any of our lifetimes. The fact that we’re now in a very different economy, it’s the contrast of that high to this low that is so stark and amazing.”
The recession was quite the game-changer in the real estate market as the country went from a building boom where new homes and businesses were being built on every street to an environment where every neighborhood was being overwhelmed with property foreclosures.
It left many business leaders trying to plot just when this economic plunge would reach its bottom. Glanvill wasn’t interested in being a prognosticator.
“You don’t predict it,” Glanvill says. “You do everything you can to right-size your company. You look at your cost structure. You make sure you get rid of any excess costs. You stop doing things that don’t add value. You take a strong look at your company and you prepare to operate it for as long as it takes in that environment.”
Glanvill preaches strategic thinking at every level of the 1,500-employee company. He wants his employees thinking every day about how they can do their jobs more effectively. By doing so, he’s confident that McCarthy will always be in a strong position, whether the economy is heading up or going down.
His approach has helped McCarthy weather the storm pretty effectively. The employee-owned company had more $2 billion in revenue before the recession hit and it still does, with $2.5 billion recorded for 2010.
Here’s how Glanvill makes strategic thinking a priority and keeps McCarthy poised for whatever the future might bring.
Make it routine
Glanvill didn’t want his employees to feel any differently as they strategized during the recession compared to when they met during the boom times. Strategic thinking should not be a big event at your company. If it is, Glanvill says you’re not doing it enough.
“You can’t just show up one day and say, ‘Let’s be strategic today,’ and have it be the first time you ever thought about it,” Glanvill says. “How do you get them to show up on a Friday afternoon and put their creativity hat on? Now all of a sudden, they are being forced to think completely differently than what they’ve been trained to do and wired to do. That’s a challenge for any organization to suddenly expect people to switch from one mindset to another.
“The answer is creating that expectation that even though I’m doing my day-to-day job and I’m working my way through it, I’m doing so in a way that constantly requires me to be planning.”
If you make strategy and planning a part of everyone’s job responsibility from day one, it’s not viewed as a burden. It’s just part of what they do. It’s a little different at McCarthy because it’s an employee-owned company. But Glanvill says the principles work just as well in any type of business.
“The key to doing it is to get people talking about it and empower them to come up with ideas and then be ready to implement them,” Glanvill says. “One thing that will infuriate your employees is if you ask them their opinion and then you don’t do anything about it. You need to report back on results.”
The accountability must work both ways. As important as it is for you to respond to ideas, you need to impress upon your people the importance of bringing ideas to you for consideration.
“Every employee is expected to come with a way of strategic thinking, not only when we put the plan together, but all the way through it,” Glanvill says. “We’re always in the middle of executing an existing plan or inventing a new plan. It’s cultural. You build that expectation into peoples’ minds. It’s not a static approach where you just ask for ideas.
“Planning underscores everything. We plan for safety, quality, profit, client relationships, everything we do around here. It’s that idea that every project we do has a margin plan, a site-specific quality plan and a site-specific safety plan. The idea of planning is a core part of what we do. It becomes not automatic, but it becomes something they are used to doing.”
Create an environment where everyone is thinking, ‘What could I be doing to help the company improve?’ and you’ll get ideas like the solar project McCarthy has launched in the southwestern United States.
“It came from an indepth study on renewable energy that two of our operating groups got together and did,” Glanvill says. “They said, ‘Let’s go ahead and take a look at that.’ Nobody asked them to do that. They did that on their own. Their leaders of their divisions did it because in their businesses and because of the tough geographical markets they are in, they could use it as a way to change their business.”
It will take some time to implement strategic thinking in a company that hasn’t really focused on it, but Glanvill says that’s OK.
“I still keep asking myself, ‘Does this add value or not? Does this have a good outcome? If I do these things, what’s going to happen?’” Glanvill says. “If I have a good plan, I can assess the risks and opportunities within that plan. Even though it appears to be a day-to-day grind, it sets the mindset of everybody incrementally improving.
“Take 1,500 people and incrementally improve them while they are doing their day job, it makes a strategic leap. It makes the creative planning meeting they have to go to a whole lot easier. Create some strategic examples of how things could be done differently. Oftentimes, if you give people a couple ideas and start them in the direction and you challenge them with some key questions, they tend to want to roll up their sleeves and solve it.”
Set high expectations
It’s not too tough to sit in a room and throw a bunch of ideas up on the board of what you could do. But if those ideas don’t ever go anywhere, what was the point? Glanvill wants employees to know that they need to do their homework when they’re thinking about ways to help the company.
“You have to have somewhat of a formal approach where there are certain areas of questioning and answers that need to be provided with each idea,” Glanvill says. “It’s by making people go through the legwork of a formal process of filling out a couple pages of written information that forces them to really flesh out the idea. You’re not making it too bureaucratic where they feel like it’s burdensome. But you have to force people to think. Great ideas are wonderful. But if you can’t articulate how they are going to apply to the business or you can’t measure the value, they aren’t great ideas. They might sound good, but you have to have a real formal way of accepting and vetting.”
When someone on your team has clearly put in the effort, recognize him or her for it, even if it’s not something you can act on at that moment.
“I had a young gentleman present a white paper on why we weren’t doing more business in India,” Glanvill says. “I commend him a lot for coming forward and having a lot of great ideas and doing the research. The right approach is to sit down and listen to him, even if you know it’s an idea that’s not going to fly. Sit down and listen to him and make sure he feels like he’s been heard.”
If you show through your actions that you’re holding people accountable to come up with solutions and not just ideas, the quality of those ideas will improve.
“When the idea is vetted and is brought forward and challenged, the employee knows they need to bring not just the idea, but a certain level of solution. By allowing them to be part of it, it’s absolutely key to setting the stage where people believe if they do come up with an idea, someone is going to act on it.
“It’s a great idea to go to India, but we don’t have the people that want to go there. It’s a great idea, but we don’t have the resources. If anybody steps up and says, ‘I’ll do it,’ you have to be prepared to clear the path for them and allow them to do it.”
The vetting process is obviously key to sorting through ideas and moving the ones that can work on down the line. Glanvill relies on a panel of 10 leaders that he keeps in touch with on a regular basis. He wants to make sure they are doing their job fielding and discussing ways to improve the business.
“You have to spend a lot of time with your key leaders to know who is good at it and who is not,” Glanvill says. “The process you need to put in place is have a report-out process fairly often. If you’re going to lead a strategic initiative, you have to be accountable for it. It means you have to present the ideas that you’ve collected, present status and progress reports.”
If the people coordinating ideas aren’t meeting expectations, make changes.
“Sometimes we have changed the leaders because we’ve had those complaints,” Glanvill says. “You’re not engaged enough or you’re not listening enough. It’s being able to recognize those folks who are good at it and those who are not good at it.”
Glanvill preaches strategic thinking whether McCarthy is operating in a good economy or a bad one. But he does recognize that his people have other day-to-day responsibilities.
“You don’t want to be doing strategic planning 40 hours a week,” Glanvill says. “You don’t want your employees sitting there thinking that you’re asking them to be creative every minute of the day and you’re losing their core work. It always gets back to that planning culture and people knowing that when they do have a great idea, it will be heard and they will be able to participate in the right way.”
Glanvill keeps his eyes open so that when people are ready to take on more responsibility and fill the leadership roles needed to make things happen, it’s a fairly seamless process. He wants people to always be thinking about where they might in to the company’s future and then feel they have a path to get there.
“Strategic planning and leadership development go hand in hand because you need to have a talent management process that identifies who the top talent is,” Glanvill says. “They become the leading advocates for your strategic planning process. You get the right people identified, you get them on the right path, you empower them to become strategic, you empower the whole organization to become better at planning and with a little bit of formal process overlay, but not too much bureaucracy, you clear the way for people to do the things they are good at doing.”
You need to create a culture where people are always thinking about what the company might need in the future.
“We have a strong culture of everybody needing to name two people who could take their job,” Glanvill says. “So everybody in the organization is constantly trying to identify talent.”
When business units at McCarthy meet, they must bring in their organizational charts.
“It’s color coded in terms of people who are doing well and people who are emerging leaders and people who are ready for advancement,” Glanvill says. “We not only force them to do it on what today’s environment looks like, but we get them to show a future org chart three years from now and what it’s going to look like. Who are the potential candidates to fill those roles?”
Glanvill wants employees to be thinking strategically about both the business and about the personnel who will conduct that business and plot the direction of the company.
“You have a process that migrates talent in the organization and it creates opportunity,” Glanvill says. “Identification of the high-potential people that are in the funnel, you have it on a spreadsheet and you talk about it often. One of the columns that needs to be filled is, what is their next development step? Where are they going next?”
How to reach: McCarthy Building Companies Inc., (314) 968-3300 or www.mccarthy.com
The Glanvill File
Born: Johannesburg, South Africa
Education: Bachelor of science and master’s degree, civil and structural engineering, University of Natal (University of KwaZulu Natal), Durban, South Africa
What is the best advice you ever received?
Treat others the way you would like to be treated. Work very hard by setting the example. You set the tone; you set the work ethic. And then with a few other leadership qualities like listening and being able to make decisions, trust your partners to make good decisions.
Glanvill on leadership: The key to being a strong leader is to be able to articulate a good set of behavioral values and you have to be able to put them into action. There are certainly those who are born with natural leadership skills. But leadership can be taught and it can be learned. There are many people who have learned it who are not necessarily as effective as those who have natural skills. But I don’t think that all great leaders have natural skills.
Glanvill on the benefits of employee ownership: People are a whole lot more interested when it’s their company. I look at our ownership structure and I look at our culture, and you’ve got 1,500 people all incrementally trying to be 10, 15 or 20 percent better and owning their own development. You create that expectation in them. You can take another 1,500-man team that is publically traded, family owned, management owned, and we’d beat the socks off of them. Just by definition, we’ve empowered so many people to the outcome. The reward is personal because of accountability.
Are you asking and expecting more out of your people than you were a year ago? If you are, you’re not alone. Many business leaders are asking their employees to give more for the same or less than they had been making in order to keep the company making ends meet. Assuring that your team is part of your vision and is willing to give this extra effort rather than being an impediment to your list of to-dos is a swinging gate to success or failure.
A crucial part of navigating the turbulent waters of these economic times is to be sure you keep the right crew aboard to keep your ship afloat. Organizations that lose focus on this are asking for trouble both now and in the future, if they have one.
Here are five tips to be sure your high flyers are flying with you:
Determine the motivations of top talent
How do you do this? Ask them. Be specific and make sure that your top brass answers questions like the following:
- Are you happy with where your career is headed?
- What would you like the next step in your career to be?
- How can I/we help you get there?
Exit interviews are not the time to determine these motivations. Find out what your future leaders need now and feed those who feed your machine.
Make individual meetings a standard
Another common fumble by companies is that they don’t make individual updates a cultural consistency. They do backflips for their clients, yet they don’t look inward and pay special attention to those who drive business and pump oxygen into their organization. Meeting with your folks individually recognizes their importance and provides a wonderful forum for discovering what they may not disclose in a group meeting.
Delegate and give responsibility
One of the biggest challenges for execs is to let go. It’s difficult for them because all that happens under their jurisdiction is their responsibility. Remember that your emerging leaders want to be challenged and be given assignments that utilize their talent. This is how they learn. Let go and show trust and you will be surrounded with a higher performing team.
Become a teaching executive
Even the brightest executives have never been taught the fundamental rule of adult learning: Teaching hasn’t occurred until learning is confirmed. Telling isn’t teaching and execs must know that even the brightest talent may process information differently than they do. Be sure you are patient and aligned as you develop and confirm that understanding has happened.
In the absence of feedback, people create their own opinions of what’s happening and it’s typically negative. You must keep your folks abreast of what’s going on, regularly. Provide knowledge which is different from data. Data is merely “the what.” Knowledge is “the what, the why and the how they play a vital role to change and growth.” Keep your top talent informed and you will keep morale high and get these key players to feel passionate about sticking around.
Joe Takash is the president of Victory Consulting, a Chicago-based executive and organizational development firm. He advises clients on leadership strategies and has helped executives prepare for $3 billion worth of sales presentations. He is a keynote speaker for executive retreats, sales meetings and management conferences and has appeared in numerous media outlets. Learn more at www.victoryconsulting.com.
How do you spell relief?
The short answer is: C-U-S-T-O-M-E-R L-O-Y-A-L-T-Y and E-M-P-L-O-Y-E-E P-E-R-F-O-R-M-A-N-C-E.
As leaders in business, we all struggle with how to find solutions to reduce the pain within our own competitive working environment. Building off of personal experiences, I have found that success comes from embracing a formula of unparalleled customer loyalty and exceptional employee performance.
The key to gaining customer loyalty and employee performance is to earn it. Talk is cheap. It is then up to us create a blueprint to excel in these critical areas. Ask your customers and yourself these 10 probing questions. If you then execute on them, you will be well on your way to success. Do it, and, yes, business will follow.
Know thy customer
Consider going out on a limb, sitting down with your customers and asking them these five questions (I refer to it as my annual “in-touch” initiative):
1. What is the most important thing you value of us as your professional service provider?
2. We pride ourselves on our extraordinary service. What’s the most extraordinary thing we have done for you over the past 12 months? Why did this impress you?
3. If we could improve just one thing to make our partnership even stronger and more meaningful over the past year, what would it be?
4. What is one thing we should stop doing and reallocate those resources to other areas?
5. We’re committed to creating a professional, yet family-like environment here. What would make you feel more part of our family?
The best time to ask customers questions of this nature is in a relaxed environment (e.g., not at a meeting or convention). Let the customer know in advance the purpose of your questions and how they will be used. Remember to thank them for their input. By reaching out to your customer and sharing the collective responses back to them, strong customer loyalty will follow.
Trust thy employees
Your employees/associates are the key to delivering extraordinary service, and those who are good at what they do, and love doing it, tend to drive customer loyalty. A successful customer-focused organization is one that is, first and foremost, client-centric. Here are five questions you might ask your employees/associates to get a sense of what might make them more satisfied, productive and enabled:
1. What do you love about your job?
2. What two things do you need in the workplace that will enable you to perform your job better?
3. What two obstacles can we remove to allow you to perform at a higher level, thus making your job more rewarding to you?
4. What makes you feel valued and a part of our workplace family?
5. What other responsibilities or jobs in the organization would you like to be involved in?
The answers to these questions will serve as a barometer of workplace effort, attitude and engagement. The CEO should openly share this feedback with all associates, comment on how it impacts business and what, if any, changes might be in the works based on the responses. While not all responses demand changes, all comments should be heard, recognized and considered.
Your employees are your eyes, ears and voice to the customer world. They are your idea generators, your efficiency experts and your image makers. Connect to them, know them and respond to them. An employee who feels listened to, supported and personally cared for will provide the same responses for the customer.
Relief from the challenges we all face daily will come in many ways. Consider these 10 questions on customer loyalty and employee performance, execute on them, and you will find that you are well on your way to an even healthier environment geared towards continued success.
G.A. Taylor Fernley is president and CEO of Fernley & Fernley, an association management company founded in 1886. Reach him at tfernley(at)fernley.com, or for more information, visit www.fernley.com.
In October 2010, Vince Donnelly was in the position of being acquired. PMA Cos. Inc., which he leads as president and CEO, was acquired by Old Republic International Corp.
The acquisition came with a number of positives for PMA. It provided an infusion of capital and additional resources, allowing the company to increase its operational flexibility. Old Republic also allowed PMA to retain a high degree of autonomy in terms of its day-to-day operations and culture.
But change is still change, and Donnelly needed to pilot an organization of more than 1,000 people through a foundational transition. He needed to quiet concerns and define what PMA would look like moving forward.
“Never having led an organization that became part of another company, it was certainly a challenge from a leadership perspective, both in terms of the internal and external processes involved, talking to our existing shareholders at the time, in terms of what was going on and why we were doing it,” Donnelly says. “Then, it was talking to our customer base and to our employee base.”
In short, the acquisition tested Donnelly’s ability as a communicator. He was quickly reminded that communication isn’t about talking or making speeches. It’s about connecting with people.
“I talked with different people about what the future was going to be like as we made this transition,” Donnelly says. “I found that it is always most effective to physically meet with people and look them in the eye. So I started out by visiting every single one of our locations, talking to our employees and explaining the rationale for this, and most importantly talking about what the future was going to be for us as an organization.”
Start a dialogue
The acquisition became official on Oct. 1, 2010, but the process of informing employees began four months earlier. In June, Donnelly and the leadership team at PMA began travelling to the company’s 20 offices, answering questions and disseminating the information they had available.
Donnelly says one of his most critical tasks was to outline the specific ways in which PMA would change. On the whole, the effect on the employees’ day-to-day tasks was minimal, but that’s not the default mindset of most employees when they hear a big change is in the works.
“There were some transitions in terms of our back room financial area, since we were no longer going to be a stand-alone public company,” Donnelly says. “There were some other functions that became integrated, but mostly everything was going to stay as it was before. However, when you announce some kind of change, whether small or large, people always personalize it. The biggest question they have is ‘What does it mean for me?’ So first, I tried to address what this was all going to mean on a day-to-day basis for our operation. I explained that to them, I gave them some information about our new parent company, about their operating style, their people and so forth, and what it meant for us going forward.
“Second, I talked about how I perceived this as an employee and as the leader of the company. I talked about why I viewed this as a positive for the companies, knowing that the fundamental question in their minds was ‘What is going to happen to my job?’”
The jobs question was one that Donnelly had to meet head-on, in an attempt to combat any speculation originating from outside the company.
“As we announced the acquisition, some of the local press automatically made the assumption that an acquisition was being made, so tons of jobs could be lost,” Donnelly says. “That is why I had to quickly emphasize that most everything was going to stay as it had been. The changes were going to be more like, instead of preparing documents as a public company would and reporting to the SEC, we were now going to share that information with the holding company, and they would take care of that kind of reporting.”
The need for repetition in communication during the first months after the acquisition announcement reinforced a valuable lesson to Donnelly: leaders need to open a dialogue with employees in a time of change and transition, because you can’t simply lecture to your team. You need to give your team a voice to raise questions and concerns to you and the leaders of the company.
“I would tell other leaders going through a transition a few things,” Donnelly says. “First, there is no such thing as communicating too much. Second, you can’t just send out memos or anything like that. You have to talk to people directly. They need to hear from you. Opening that back-and-forth communication creates an environment where people feel free and open to ask the questions on their minds. Because, as a CEO, you can get caught up in the fact that these are corporate decisions, but from an employee perspective it is a very personal thing. You need to be sensitive to that and make sure that the communication strategy, while you need to deliver a big-picture perspective, you need to make sure that you are focused on the impact it will have on each individual employee. While you are not going to talk to each individual employee, you are going to create an environment where hopefully people can ask questions and address their concerns.”
And if you’ve done it once, or even a few times, you need to repeat the cycle of talking and listening.
“It’s not just one and done,” Donnelly says. “Communication needs to be continual. You need to continue to reinforce the messages that you want people to internalize. So you need to understand that communication is a continuous process and not something that you do just once.”
Work as a team
You need to have an excellent grasp of your role in leading your company through a time of transition. But part of that role is knowing how your leadership team should support your initiatives. That includes not only your direct reports, but anyone in your organization with a supervisory role.
“It is on me to make sure that I sensitize our management people as to how important it is to communicate,” Donnelly says. “Like communicating directly with all of our employees, communicating with management is a continual thing. The leaders of the company have had to enable the other management people to answer questions throughout this process, and if questions need to be fed upward to the senior management level, or my level, we coached them to be responsive to that.”
Donnelly created multiple avenues for people to interface with one another, even when they couldn’t be in the same room — or even the same city — together, including videoconferences to update employees on the status of the acquisition. Even with the acquisition itself in the rearview mirror, Donnelly has continued the quarterly videoconferences.
The point, he says, is to continually engage not only the lower-level employees who have the most organizational separation from management, but also to keep management on their toes. If employees are willing and able to fire off questions, managers at every level should be poised like an infielder ready to pounce on a ground ball — on their toes and paying attention.
“The way we handled it, our communication during this time wasn’t supposed to be solely a cascading thing,” Donnelly says. “It always has to be a two-way street. You speak to your people, and they respond by bubbling messages upward. I try hard to think about what might be on people’s minds in a given situation, but you’re never going to be 100 percent right. You want an environment where people will raise the questions they have. And that doesn’t just go for the primary situation you want to address. It should be a day-to-day thing, where people are stepping up to interact not just with the CEO, but with all management-level people. You facilitate that dialogue and open up those avenues because you have to create an environment where it is as effective talking upward through the organization as it is talking downward.”
If you want to foster a team mindset throughout your company, you have to set the example by showing your staff that you view yourself as part of the team. Donnelly accomplishes that by, as he puts it, “humanizing” himself. It’s more than just making yourself visible and accessible. You have to be willing to relate to your people and, at times, appear vulnerable.
In the months leading up to the formal acquisition announcement, Donnelly didn’t have all the answers that every person at PMA wanted to hear. So he had to tell them exactly that. It doesn’t mean you shrug your shoulders and walk away. It means you are frank and honest, and make the promise to your people to share as much as you know, and build a sense of trust that will allow them to believe that when you know more, you’ll tell them.
“Throughout the process, I told people that there would be consolidation of some functions, but I also came right out and told them that I didn’t know the specifics yet,” Donnelly says. “I told them that when I knew, I would communicate that. You can’t be afraid to tell people that you don’t know something at that moment, or that you aren’t free to talk about something at that moment due to regulations. What you are asking people to do is trust you, [trust] that you have the best interest of everybody in mind, and [trust that] when there is news to tell, you’re going to hear it directly from the CEO — good, bad or indifferent. It goes back to interacting with people and remaining consistent in how you communicate so that people build a sense of trust. I still tell all the people there that they will never hear any significant news about the company from anybody but me. You will never hear it from the outside world first.”
If you aren’t forthcoming with information, not only will you lose that sense of trust, you will allow the rumor mill to power up. If you remain silent, your employees — and even your lower- and middle-level managers, will fill in the blanks on their own, with whatever bits of pieces of information they can find.
“If real information doesn’t exist, people will fill in the blanks,” Donnelly says. “They’ll stand by the water cooler or the coffee machine, and they’ll say ‘You know, I think this is going to happen because I saw that Vince didn’t have a smile on his face today, and there was this closed-door meeting.’ People will make assumptions, and when they make assumptions, they often don’t get things right. That’s why it is important to share information, and while you can’t always tell everybody everything that is going on, in general you need to be out in front with communication so that people don’t start filling in the blanks themselves.”
More than a year after the acquisition, Donnelly has kept the same communication strategy in place. He doesn’t want the trust factor to erode, because the next challenging time could be right around the corner, and it will once again be critical to have everyone in the information loop throughout the company.
“It’s like any relationship,” Donnelly says. “If all you do is talk when there is a problem, you have no goodwill to fall back on, and you’re generally not going to be successful. It’s always a continual thing. You can’t just walk in one day and say ‘OK, I’m going to tell you what is going on, and ask me any questions,’ and then walk away. If you go away or don’t address the situation again for a while, you can’t expect people to respond to that. You lose the human element that is so important to good communication, and good leadership.”
How to reach: PMA Cos. Inc., (610) 397-5298 or www.pmacompanies.com
In January 2009, Smart Business Philadelphia previously featured president and CEO Vince Donnelly and PMA Companies (then PMA Capital Corp.) on its cover. Great advice doesn’t have an expiration date, so here is a look back at some of the leadership insights Donnelly shared with us three years ago:
Donnelly on having passion for what you do: Passion comes down to the fact that you have to want to be a leader. Part of that, admittedly, is something to do with ego. But not in terms of titles and positions. It’s that you want that responsibility. I used to be a schoolteacher, and in addition to that, I coached basketball. Being a leader means you want to be the one to take the last shot in the game.
Donnelly on honesty: As far as honesty, people see through whether you are BS-ing or not. It’s a lesson I learned from my mom. She told me that there are some people in life who are two-faced. When things are going well, they act one way, but when things aren’t going well, they’re going to act a different way. People are looking for that honesty and consistency from you as a person. An effective leader is someone who is respected not just for their title but is respected as a person.
Donnelly on expansion: Successful companies are constantly challenging themselves. We charted a course to expand into the fee-based business. But I think that whether you make a new hire, open a new facility or enter a new territory, you have to ask how this fits in to what you do. Does it make you better or is it just something to do? Some companies change for change’s sake. We don’t do that.
When William Lambert looks back at his transition into his role as CEO, he remembers a time of uncertainty. He could tell that dark clouds were forming and a recessionary storm was approaching.
Lambert took the CEO role of Mine Safety Appliances Co., a nearly $1 billion global manufacturer of safety equipment that employs 5,200 people around the world, in 2008 and serves as president and CEO today. With a harsh economic environment ahead of the company, Lambert gathered his executive team and planned for how to carry the business forward without sacrificing its status as a leading safety equipment manufacturer.
“Just after I became CEO, I think the dark clouds had started to form and already were starting to impact our business, and by the end of 2008, had really impacted our business in a significant way,” Lambert says. “2009 was difficult. We were focused on the core areas of strength for MSA.”
The nearly 100-year-old company is no stranger to the ups and downs of economic cycles. Together with his leadership team, Lambert led a corporate strategy to push MSA forward focusing on strengths, the customer voice, and areas of growth in an effort to make the business stronger than before.
Here’s how Lambert carried MSA through the tough times by improving the core areas of the company.
Overhaul your corporate strategy
Whether you are facing good times or bad in your business, a focus on strategy is critically important for leading a successful company.
“We do a major look and overhaul of our corporate strategy just about every five years,” Lambert says. “We had made an update to the previous corporate strategy in 2006, and in 2008, we could begin to see the signs that things were about to get serious. It was about that time that we were coming due on a new corporate strategy, and there were some indications that there was a crisis coming and so we decided to accelerate a new corporate strategy.”
MSA brought in experts to help the board and the leadership team in the guided effort over a multimonth period. It could not have come at a better time.
“2009 was a very concerning time for everybody to batten down the hatches and make sure that your business could make the adjustments and weather the storm,” Lambert says. “I’m very pleased that this leadership team here at MSA did a great job of getting us through and the strategy helped to be that guide to help with some of those tough decisions we had to make.”
Those tough decisions revolved around the core areas of MSA — its line of safety products. Secondly, the company took a look at adjacent areas that could help continue to grow the business.
“Most businesses have a core that has been very successful in the past and where so much of your capabilities and strengths are centered,” he says. “Every business also needs to move into adjacent areas just outside the core. These adjacent areas tend to be derived from the core, but hopefully those adjacencies strengthen the core in some way.”
These adjacencies by definition and by the very nature of human behavior start to lead you into peripheries.
“It’s kind of an adjacent area, but it tends to be even further from the core,” he says. “You have to simply understand how you look at your business. Where’s the value really being generated? What creates value? Is it the core or is it in the adjacent area, which means the core is shifting to this new adjacent area? Generally the value is not being generated in the periphery. Generally it’s been my experience that the periphery actually destroys value. It can detract from the value generating capability of the company. It can distract management. It seems like a good idea, but when you really get down to it … these peripherals tend to not add value.”
How your business creates value is what keeps it moving forward, especially in the bad times. To add value or create new value you have to have a plan.
“Businesses need to have a plan,” Lambert says. “It’s not so much the plan, but it’s all the planning that goes into it. Dwight Eisenhower said that the plan is nothing. It’s the planning that’s everything. It’s the thinking through the various scenarios and understanding the business and what are the value drivers of the business. Where is value derived? Where is value created? Then it’s deciding what is the core that you want to build on for the future? Over time, that changes. Over time it has changed for MSA. At one time, mining was our core. The mining market today represents 10 to 12 percent of our total sales. The core of MSA has shifted somewhat from where we were at one point in our company’s journey. Our top three markets today are oil and gas, construction, and first responders. Mining is our fourth now.”
The company’s latest plan focused on its five leading lines of safety products and it would ultimately be the customers who would provide the new directions for improving them.
“There are five areas to our core and these are those areas of the business that generate the most value, create the most value, that get disproportionate resources and investments, and they get the most management attention,” he says. “That’s where we spend our time talking and debating and investing and that’s where we have market-leading positions.”
Find the voice of the customer
To strengthen the company’s core product areas, MSA went to its customers to understand where their needs were and how the company could meet them.
“At MSA, we have seven core values that we use to guide our efforts and to guide our behaviors,” Lambert says. “One of those core values is customer focus. Driving customer satisfaction is one of the most important things that we look to do, that we look to measure, especially in mature markets. In those kinds of mature markets, the way you gain share, the way you increase sales, is through innovation and product development efforts meeting unmet needs of the customers. Listen to the voice of the customer and then also drive customer satisfaction, measure customer satisfaction and measure customer loyalty and then make the adjustments in the factory or other areas where you service the customer.”
These “voice of the customer” activities must be embedded in your research and development teams, your product enhancement teams, your manufacturing and quality teams and even into your customer service center.
“We listen to the voice of the customer and then we track those issues and put improvement plans in place based on that which we’re being told,” he says. “The first step is you have to measure. You have to start to measure what your customers are saying. Do the customer satisfaction and loyalty surveys and find out what the drivers are behind those responses and how customers view you. Then you have to understand what the drivers of customer satisfaction are in your particular business or company.”
Driving a customer focus in your business starts with developing a culture that puts the customer at the forefront of your operations.
“The culture that we’re trying to create has to do with that core value of having a customer focus,” he says. “There are customer-focused initiatives throughout the organization. We all know that it’s one of the core values that we have here so that drives a culture of continuously monitoring and seeking to improve that customer experience.”
As with the creation of any company culture, it has to start at the top of the organization and be pushed throughout to be successful.
“The creation of a customer-focused culture is difficult,” Lambert says. “There has to be a tone at the top of the organization that emphasizes it, that expects it, that highlights it, that makes it one of the core values you have as an organization. Then you talk about it. You talk to the associates about the customer experience and measure the customer experience and customer satisfaction results and then you can communicate those to the work force. Then you get the work force engaged by setting up teams that address certain issues and problems and begin to solve some of these customer experiences. You get your engineers out in the field living with customers or users and observe how your product performs in the field. Or talk to distributors about their experience when the product arrives on their shipping dock. Pretty soon, the culture begins to develop a momentum of it’s own within the organization. You make it a part of the everyday dialogue and the every-week dialogue.”
Put your plan in motion
Lambert and the folks at MSA had the foresight to develop the company’s new plan before the economy really took a fall. As the environment grew worse, Lambert began to do the things outlined in the corporate strategy.
“When we put our corporate strategy together back in 2008, the elements of our strategy focused on the core of MSA,” Lambert says. “That was one big element or pillar of our strategy. The second pillar was a focus on the emerging markets. The emerging markets of middle Eurasia, Latin America, Southeast Asia and China, those four areas are where we saw great growth potential for the future. Double-digit growth potential, adding head count, adding employment, increased activities going on in those core industries of ours like oil and gas, construction, fire service first responders and mining. So that was the second pillar of our approach to put programs and initiatives in place that focused on the emerging markets area. The third pillar was called Project Magellan, which was to have the organization best enabled for this emerging market growth.”
MSA found the new markets it saw the greatest potential in and then began to invest in developing initiatives to grow its operations and in some cases shrink its operations around the world where necessary.
“If we were to really grow the way we thought we could grow in China, we needed to have a new facility, a new investment, a new plant, and a new R&D center in China,” he says. “We also opened a new plant in Mexico. We expanded our San Paulo, Brazil, plant. At the same time, there were certain parts of the organization that we needed to shrink. We no longer needed the same kind of footprint in the company because that wasn’t the area of focus or the area of the core that we wanted to emphasize.”
MSA had a Berlin plant where it manufactured protective suits. Protective suits were a peripheral product and weren’t in the core, so the company moved away from and deemphasized that part of the business and that product line.
“As you go through this exercise of looking at your portfolio and looking at what you really want to focus on for growth in the future and where that is going to be coming from, then you start to make those kinds of choices to shrink this part of a factory or your footprint in this part of the world, because you’re increasing your footprint in this other area of the world,” Lambert says. “Those are the capital allocation decisions and resource decisions that we were making. Project Magellan was really about understanding our footprint and where our focus was and where the best places for us to put our resources were. It involved more than just manufacturing, it involved all aspects of our business.”
The decisions to become leaner and more efficient and find the markets you can grow and prosper in have to always be going through the minds of business leaders.
“You need to go through an assessment of the attractiveness of that market, the growth potential, the profitability potential, and the competitive rivalry that exists in that area,” he says. “There’s got to be a relatively thorough process of understanding and measuring all of that and then you chart out your course to say, ‘Here are my critical success factors. Here’s what we need to do better than those others to achieve this success.’ Then establish for yourself some mileposts. Here’s what we expect to do by six months into it. Here’s what we expect by the end of year one. Here’s where we ought to be 18 months from now, two years from now, three years from now, four years from now. Here’s how we get to that vision of future success.”
HOW TO REACH: Mine Safety Appliances Co., (800) 672-2222 or www.msanet.com
Lead a corporate strategy every few years to keep your company agile.
Understand customer needs and develop a customer-focused culture.
Discover areas of growth and areas you can shrink to improve operations.
The Lambert File
President and CEO
Mine Safety Appliances Co.
Education: Attended Penn State University and received a degree in mechanical engineering. Received a master’s degree in industrial administration from Carnegie Mellon University
What was your very first job and what did you learn from that experience?
I was a paper boy and I delivered the Pittsburgh Press and the Pittsburgh Post Gazette. I learned a strong sense of commitment. It was something that other people depended on. They depended on reading that newspaper every morning or every evening, so I had to be dependable and reliable. It didn’t matter if it was snowy, icy, rainy or a real hot summer afternoon day … I had to deliver those newspapers because my customers depended on me. It instilled a strong work ethic and sensitivity to customer satisfaction.
What is the best business advice you’ve ever received?
Sometimes it’s not about being the smartest, but it’s about working the hardest and being the most committed to the mission that drives success. The other advice that I’ve received over time is that it’s also about the emotional intelligence that you have as a leader and how you influence people and how you lead people emotionally, not just intellectually.
What would you say is one of the most important products or innovations today in the safety field?
The ALTAIR 5X incorporates what we call XCell Sensors and these sensors are absolutely changing the market for portable gas detection instruments — total cost of ownership, reliability, durability and response times. These XCell Sensors are one of the most dramatic and important innovations to come along in the safety industry in a long time.
If you could do something dangerous one time without consequence, what would you do?
I would sky dive. I think the freefall would be exhilarating. That’s only because I would be guaranteed there wouldn’t be an unfavorable outcome.
When Antonio Torres looks at the building and construction industry he sees opportunity. He knows that it’s not what it used to be, but as president of Syntheon Inc., a building science company, he also knows that if you don’t sit on your laurels you can accomplish great and new things.
Torres has taken advantage of the economic times and has used that to find new opportunities within Syntheon to continue to grow the more than $20 million, 200-employee company.
“This is an industry that can change and is an industry that hasn’t changed in a very long time,” Torres says. “It’s a tremendous opportunity and a great place to create jobs and a great industry for the U.S., and I’m very pumped up about delivering it in a new different more efficient way.”
It is that excitement that has allowed Torres and Syntheon to think about the business in different ways.
Smart Business spoke to Torres about how he has grown his company by taking advantage of opportunity.
Be creative. In a company that’s multinational, you end up shifting resources around to the high-growth areas and minimizing the resources in the lower-cost areas as much as you can do that. That’s one good lever that you have. The other thing is, this is a good time to do the development for new products. If you think about the construction industry at the peak, the amount of work that was done on the fact that you could sell everything you made or every contract you signed, kept all your workers busy and your manufacturing plants running at full-tilt. That did not allow for any new development. Now there is a little bit more bandwidth for those manufacturers or contractors to take a look at what’s new out there and integrate that into my options as the economy begins to turn.
The other thing is just keeping everybody focused on the longer-term vision rather than the short-term issues. Especially in a company like this one where what we’re trying to get to requires significant resources and aspiration work, and we’re not where we want to be. Having people focused on the capabilities that need to be developed internally has also been important, and it’s a good time to do it, because there is not external pull for business.
Take advantage of opportunities. The challenge is of course what situation your company is in. If you can afford it, the best thing to do is identify your lead users. These are customers that are very willing to be the first out in the market with a new product, new idea, or a new system, and then work with them closely to pull the technology out of your company.
It gets your customer motivated and then your employees see that even during more difficult times, there are people out there trying to make a difference and trying to change the world, or at least improve it, and everybody stays focused on the future rather than the present. You have to focus beyond tomorrow, especially when we’re in the times that we’re in, because it will get better. We have to be ready when it gets better with different offerings and different capabilities than the ones we had when we got into the quagmire that we’re in today.
Focus on growth and focus on the longer-term vision. Look outward from your company. I think that many times, especially in bigger companies, we tend to internally focus and internally develop answers that while they may be quite advanced and very capable, may not meet the needs of the consumer. You have to get out of the company.
Balance your culture. One culture, I’ll call the growth culture, and the other, optimization culture. The growth culture really looks at what the customers are doing, where codes are going, what’s the government thinking, and how is (the industry) implementing this. That culture really brings a lot of richness to your ability to develop the appropriate right products. The problem with that culture though is that they don’t like to close; they don’t like to implement. They are inquisitive and want to find out what’s happening.
Then you have the optimization culture that says, ‘Hey, enough inventing, enough ideas, we’ve got to sell something. If we don’t sell something, we’re not going to be around.’ So there is a natural tension within a successful company where you have enough of the growth culture people and enough of the optimization folks to keep the company growing.
A lot of the focus of the CEO has to be to protect both of those. If you don’t protect the growth people, they all get fired. They’re seen as inefficient and not creating any value. If you don’t protect the optimization people they’re seen as too narrow-minded, not enough capability, hard to deal with and so on. The CEO has to establish a balance and that’s the key for an innovative culture in a growth culture.
HOW TO REACH: Syntheon Inc., (412) 490-4252 or www.syntheoninc.com
Over the past few years, John Foster’s clients have not been embracing the conventional approach to the way his company does business, and its sales and backlog have been dropping below forecasts because of it.
Foster, president and CEO of Coutinho & Ferrostaal Inc. North America, a division of Coutinho & Ferrostaal, one of the largest independent steel trading companies in the world, had to make a choice when the recession hit in 2008. The company could wait to see what became of the economy and its customer’s reactions to it, or it could adapt to the changes and position itself for the foreseeable future.
No matter what the decision, the more than $500 million division could no longer survive doing business as usual. Foster chose to shake things up to regain confidence and trust from the business’s customers.
“My focus and challenge has been on re-engineering the mindset of a well seasoned but cognitively well entrenched team of professionals and a back-to-back trading philosophy,” Foster says. “Moreover, set the challenge to go beyond what has been the tried and true commercial formula of the steel trading business for literally decades and now embrace the already re-engineered mindset of our customer base that has changed significantly over the past 10 years.”
Coutinho & Ferrostaal had to switch from being a principal in a global steel transaction to becoming more of a value-added service partner for its customers.
Here’s how Foster took on the challenge of embracing a re-engineered mindset of the company’s customers in order to survive.
Shake up your comfort zone
In today’s business environment, it would be a tough task to find many businesses or industries that haven’t had to change critical ways in which they operate because of new market dynamics. The steel trading industry is no exception.
“The fundamental reasons such change was necessary are found in the fact that the traditional landscape of the trading model, although not obsolete by any means, had changed, and if new avenues of value and commerce were not found, embraced and expanded upon, our company would not only not grow, but fall badly behind the curve of creative innovation that our trade partners have come to expect from our organization,” Foster says. “This meant initiating some monumental change to meet some monumental challenges and where business as usual was not going to cut it.”
The needs of Coutinho & Ferrostaal’s clients have been changing since the explosion of the internet and were altered again when the Great Recession hit. Foster had to help his team understand that their customer’s financial and risk management needs had changed dramatically.
“With the advent of the Internet into our business as well as the proliferation of mass information media start-ups, our customers, vendors and most importantly our competitors knew most of what was happening in the globalized steel world the same moment we did,” Foster says. “The other important and more recent change dynamic that needed to be addressed was the dramatic alteration in how our customers and supply partners evaluated risk and coped with financial stress in light of the varying degrees of corporate trauma that ensued since mid-2008.”
This loss of a particular competitive advantage forced Foster and his employees to bring other value to the daily transaction equation. As is the case with many crisis situations, opportunities can be found. The challenge here was to take the team out of its comfort zone of traditional business and start listening much more closely to trade partners who were no longer interested in going offshore for steel, but rather turning to domestic supply.
“After all those years of having the ball in your hand for the customers needs and then almost overnight they said, ‘I’m not going to buy your futures anymore … I’d rather buy from you, but you have to have it here for me,’” Foster says. “So right there was a pretty big sea change in how we do our business, going from two-, three- or four-month futures to a just-in-time type of approach.”
To get his team on the same page, Foster had to sit down and lay out the situation in order to understand where to go.
“We sat down with the rest of our department heads and asked, ‘How are we going to manage this? How are we going to meet these needs? These are things we haven’t done before. What are our risk guidelines?’” Foster says. “As a global company, we literally had to redo our risk guidelines. If you’re too conservative, you’re not going to survive. We had to use our professional expertise and change our risk guidelines to align ourselves with customer needs.”
In situations like these, you can never communicate too much.
“You just really need to explain it to them in very clear terms,” he says. “This is what we’re going to need to do to get back to where we were. By just putting up simple pictures, you really impress upon people. I like to get the group together and say, ‘Here’s where our performance has been the last three years. Here’s the event that happened. This is the effect it had upon us. These are our forecasts and we’re having trouble getting there because what worked for all these past years is not working.’
It was really quite a revelation to bring everybody into the mix and say, ‘This is the challenge we have and this is what we’re being told to do. How can you help do it?’ It’s just listening and communicating it to the entire corporation.”
The changes in the steel trading market were happening quickly and Foster and his team had to do everything they could to keep up and find out what the company could do to meet the new needs.
“Budgets were revamped and cost-cutting measures were initiated,” Foster says. “Because of the speed of the market retraction however, we found ourselves being in more of a reactive mode than a proactive one. This was when we readily saw the need to pool the brain trust of our key leaders from the financial, logistics and commercial sectors of our company and turn ourselves into a more proactive direction and highlight as many creative options as we could to generate positive business.”
These options primarily revolved around financial services and expanded risk-management models. However, they quickly recognized a key element was missing.
“That element was feedback from our many trade partners as to what they now need to meet their own particular set of challenges,” he says. “It was here that our own change model began to form. Moreover, it saw us moving from that initiating principal role to a better listening and more value rich service partner in our thinking.”
If Foster wanted to find out what direction to go in, he would need to go directly to customers for the answers.
“We went back to these customers and said, ‘Look, you have concerns about inventory management, we can help you do that. You want just-in-time inventory, we can help you do that.’” Foster says. “We have stepped in the middle of domestic suppliers and our customer base, which has never happened in the history of our business, and it’s just a new dynamic.”
It is crucial that you get input from both customers and employees when looking for a new direction.
“I would emphasize stepping back in times of such crisis and reminding yourself of the ever-important need to listen to the boots-on-the-ground team members while mandating the need for them to do the same with their customers and trade partners,” Foster says. “It is only through keen listening that the seeds of expanded thinking and creativity are found.”
Such listening skills must also be encouraged throughout the organization.
“No discipline of the organization can be comfortable with business as usual,” he says. “Even such stoic departments as accounting and human resources need to be given the nod that it is OK to embrace change and question what has been company policy and standards. This is one of the other keys to our implementing change initiatives—not only keen listening skills to understand what needs to be done, but encouraging a corporate culture that feels both comfortable as well as empowered to implement those changes that are viewed as positive directions for the company.”
Now that it had been established the company would need to more of a strategic partner for its customers, Foster had to get complete buy-in for the new direction.
“Buy-in can be said to be grounded in mutual respect and trust for each other’s expertise and shared vision for the company,” he says. “This is a dynamic that is not built overnight, but over years of team building and shared goal setting, albeit not always in full agreement. It is this team and shared information approach that helped us create an ‘OK, let’s try it’ attitude that gets the change mode moving. The need for a change is most fundamentally driven by both the short and long-term dynamics of the market place in which you participate day in and day out. Subsequently, the need for change simply becomes a logical business decision.”
Foster had to broadcast this new market fundamental in a clear, logical and business professional fashion to get an “all hands on deck” environment to be embraced.
“The buy-in was actually a little bit easier than I would have guessed because of the dynamics,” he says. “The rapid pace of the problem before us got people looking for answers. The environment was a fertile one for this type of change. By very logically and professionally putting out the downside versus upside and risk versus reward, it got there.”
It’s that focus on communication that will aid any business leader in changing directions and getting his company onboard.
“You have to get more than your usual team of players together in the same room,” Foster says. “Be careful not to insulate yourself from all levels of the company. I think there are some CEOs that aren’t very comfortable getting outside their own office and they tell their next-in-line lieutenants, ‘Here’s the deal.’ Those lieutenants take it to managers and those managers take it to their people. Things can get lost in translation. You have to put yourself out there as the leader across the whole scope of the company. If it’s a manufacturing company, get out on the floor. Talk to the workers and the guys on the machines. That’s what’s going to impress and engender change more quickly because you’re showing respect for the entire organization.”
Improve upon your success
Once you have found the new direction for your company and you see success, you have to continue to look for ways to meet customer needs.
“So far, I am quite pleased with our initiative results,” Foster says. “As could be expected, some divisions were more receptive to change than others. Change and further market conditions adaption is a constant, particularly in light of the recent Great Recession leaving a mark whose ramifications could be expected to last several more years going forward. At the same time, I am a firm believer that adversity is a catalyst for opportunity. I can say with confidence that our company has made great strides in changing the traditional way of conducting our business to one that absolutely expanded upon our inherent commercial skill sets and financial assets.”
The changes made have allowed the company to outperform its market and meet goals by breaking the molds of its traditional comfort levels.
“What we see now is the need to build upon our new orientation to change acceptance and get deeper into our customers and vendors hierarchy of needs while plying our well-honed and fundamental skill sets into related but new sectors of our industry,” he says. “In other words, apply what we know has worked well further up and down the industry’s commercial chain.”
HOW TO REACH: Coutinho & Ferrostaal Inc. North America, (281) 999-9995 or www.coutinhoferrostaal.com
- Test your company’s comfort zone areas so not to become complacent
- React to market and customer needs by listening and communicating
- Continue to improve upon the value your company can add
The Foster File
President and CEO
Coutinho & Ferrostaal Inc. North America
Education: Studied business and economics at Marietta College and got an MBA from the University of Colorado in association with the University of San Francisco.
What was your very first job, and what did that experience teach you?
I mowed lawns in the summer and shoveled snow in the winter. If you wanted to have some money for fun, you had to work for it.
What was the scariest part about the change initiatives at CFI?
That they might not work. Anytime you go into uncharted territory, you have that certain trepidation of, ‘Is this going to work?’ Is the team going to support it? Which I didn’t have much concern about, but the real concern was on the customer side because they were in more of a panic than we were. I was mostly concerned with would the marketplace accept the value-added service initiatives that we were bringing to their table.
What is the best business advice that you’ve ever received?
Be as open and honest with your business partners as you can, because most business is built on trust and that’s the only way you’re going to build the trust you need to bridge the most difficult times. Everybody can be friends in good times, but it’s the bad times that really test your trust and relationships.
What is your favorite thing about the steel trading business?
I just love to see the steel in a building that we sold or on the foundation of a truck trailer driving down the road. To see a ship unloading our imported steel and loading our exported steel because that is an important dynamic in our industry.
What is your favorite business trip location?
Brazil. They are excellent steel people and they know how to work hard and play hard, which is one of my philosophies.
Gary Conley is never satisfied with a process being good; it can be better and he will find ways to make it so. Conley is president and CEO of TechSolve Inc., a 55-employee consulting company that specializes in industries such as health care, manufacturing, and aerospace.
Conley and his team at TechSolve help businesses find ways to improve operations and become more efficient in any way possible. While he focuses on helping other companies, Conley has to also make sure he is keeping an eye on his own company’s processes.
“We have the same issues as our customers, although our people are trained to look for continuous improvement opportunities,” Conley says. “We need to be careful that we don’t fall into the rut of taking some of our processes for granted and not continuing to find ways to improve them.”
TechSolve utilizes concepts from Toyota’s production system of total quality management.
Smart Business spoke to Conley about how companies can focus on taking waste out of practices.
What are some common mistakes in business processes?
A common mistake is that the top management is not sufficiently engaged in the process and committed to seeing the process through. While you can often go into an organization and identify some immediate cost savings and other measures that might improve productivity or improve profitability, management needs to harvest those types of opportunities, but they also have to keep their eye on the long-term opportunity, which is to develop an environment within your company where everyone in the company is continuously looking for ways to improve.
Another mistake that’s often made is trying to do too much too quickly. This usually results in a lot of multitasking, which tends to delay improvements from actually being realized. It’s much better to focus on a smaller set of improvement initiatives and see them through than to try to take on a very large number.
How can management focus on improving processes and avoid common mistakes?
They need to learn as much as they can about the improvement methodologies that can be applied. Then they need to actually be personally engaged in the process and involved in working with their workers in the actual implementation of these methodologies. These are things that ultimately you can’t learn in the classroom. You can’t learn them by reading books. You can’t learn them just by watching. You have to actually become engaged and do them because it’s very much a high touch, contact sport. They need to establish clear goals and clear measures so that they can monitor the progress that’s being made and also so the workers and other managers who are engaged in the process can continuously evaluate where they are against the goals that have been set forth.
How do you develop a continuously improving environment?
What needs to occur is for all the managers to be aligned around the improvement initiatives and fully understand the purpose and the goals and the methods and the cultural transformation that is being pursued. Then, they, in turn, need to be trained in the methods and be personally hands-on involved in the actual implementation of the improvement.
How do you identify what processes need to be updated or changed?
In the beginning, it’s simply a matter of prioritization. What you’re looking for are improvements that will be meaningful to the organization that can be performed within a relatively short period of time so that they become a model for other divisions or work units within the organization to attempt to duplicate. You want some early successes and visible successes, meaningful successes that other people within the organization can observe and realize that benefits are being realized from the activity. That reinforces the belief within people that they can in fact make these changes and that these changes will make the organization more successful and their workplace a more secure place and a more productive place.
Another approach is if you have dissatisfaction from your customers, either as to quality or meeting delivery promise, then that might give you an indication of what would be the more meaningful project you might take on. Even if you didn’t have dissatisfaction, your sales people and people that are closest to the customers might be able to give you information about the aspects of your products or your service that would have the most meaningful impact.
What are the keys to recognizing what changes give you the best results?
You start with the basics. You want to look at the quality of your product. How much product is being returned? You could also look for areas where you have excessive scrap rates, for example. You look for bottleneck operations which might reveal themselves by very high work-in-process inventory levels. You look at how effective you are at achieving your delivery promise.
Although many of the techniques and methodologies originated within the manufacturing sector, they have universal applicability to any type of enterprise.
HOW TO REACH: TechSolve Inc., (800) 345-4482 or www.techsolve.org
Over the past few years, founder, Executive Chairman and CEO Don Murray has led Resources Connection Inc. by betting on customer service. The company’s upper management has coached the sales representatives at Resources Connection’s 80-plus offices around the world to spend as much time as possible with the company’s more than 1,900 clients.
“Lots of our clients have been going through huge issues, and you have to be empathetic to all the issues they’re going through,” Murray says. “There are a lot of ways that we can still help them. We have a great client base, and for us to be successful, we have to really keep on top of our clients and help them get through all of these issues.”
The focus on client relations has helped Murray keep Resources Connection in growth mode. The company — which operates through its subsidiary, Resources Global Professionals — generated $545 million in fiscal 2011 revenue, up from $498 million in fiscal 2010. But it has taken a lot of effort from management to find the talent and set the cultural principles that have allowed the company to continue performing at a high level, despite the economic climate.
“It really starts with the hiring,” Murray says. “If we don’t hire correctly, nothing else is going to matter. You really can’t teach talent, and to be successful, you have to have an inner drive, you have to be kind of impatient and you have to have a sense of urgency that is going to help you get through all of this. If you don’t hire the right people and you let your people become complacent, you’re never going to be successful.”
When Murray founded the company in 1996, he made up an acronym: “TIEL.” In short, TIEL spells out what type of person Murray wants on his team — the basic traits all company employees need in order to embrace and promote the culture at the company, and achieve success within the company’s framework.
“It stands for, first of all, hiring people that have talent,” he says. “We don’t want to have people who don’t have the necessary talent or skills, because then we’re carrying those people on our backs, and you’ll never win the race that way. If they have the talent, we need to make sure they have integrity. If they have those two things, we want them to have enthusiasm and a positive energy. Then, we want loyalty, so that we know those people can work well in teams. So that’s TIEL — talent, integrity, enthusiasm and loyalty.”
Job candidates, particularly for management-level positions, are assessed against the TIEL principles from the moment they walk through the door for the first interview. Murray and his leadership team try to get a grasp of a candidate’s alignment with TIEL throughout the interview process, asking questions about the person’s past professional experiences and past record of maintaining customer satisfaction.
“You get them talking about their experience and how they have actually handled things,” Murray says. “You get a feeling for whether they’re just telling you stuff that they think you want to hear, or whether they really have relevant ideas and experience. What we’ve found a lot is that people who are leaving their positions because of the changes in the economy, a lot of those people have become stale, they haven’t kept up their skill sets. So you bring all of that out in a conversation, over the span of a number of interviews. We do probably seven or eight interviews for people we are trying to hire internally, to get a broad range of opinions about that person.”
Murray says your decision on whether a job candidate is a match for your culture and mission will ultimately come down to a subjective judgment call. You will have to make up your mind one way or another. But if you know what you want in an employee and can measure each candidate against those selected qualities, you can make a much more informed and accurate decision.
An involved CEO is always the best kind of CEO when it comes to management-level hires. You don’t want to sidestep your human resources department, but you do want to know what is going on, and get a detailed background on people that could potentially find their way into an influential role on your team.
At the company, Murray and his president, Tony Cherbak, don’t delegate interviews for key positions. They see to it that one or both of them have a chance to sit down and oversee a round of interviews.
“We make sure we interview those people, whether they are going to be in our Singapore office, Brussels office, London office or wherever,” Murray says. “Too often, CEOs delegate the process of hiring someone who is going to be very important to the company. With that approach, you have different people in the company doing different methods of hiring, which means you don’t always adhere to the same standards.”
Below the upper management level, Murray might not interview the candidate directly, but he sees to it that the people who are performing the hire maintain the same standards.
“Below the people who are critical to us directly, it is really about working with the managing directors in the offices, to give them the same sense of quality,” Murray says. “We keep the principles of TIEL in front of them, and ask them to focus on those principles. That is how you keep those standards consistent, no matter where you’re hiring throughout the company.”
One of the hardest components to maintain high standards in your hiring practices is the willingness to wait out a drought. If satisfactory resumes aren’t showing up in your e-mail inbox or candidates don’t impress you during the interview process, you can begin to feel the pressure to get someone hired as the process shuffles along. But you need to remember that the wrong hire will cost you more in the long run than having a vacant position in the short-to-medium term.
“We have offices that could use five more people, but those offices haven’t yet found the right people to hire, so they aren’t hiring,” Murray says. “We have some places that are three people down because they can’t find the right people. What happens is you need the people already in place to chip in, do a little extra and realize that you’re just going to have to lose some of the short-term growth that you would have if you were able to hire a few more good people. You keep reminding them that hiring the wrong person creates so much negative energy, it wastes so much time, you are simply better off not having a person than having a person who creates a negative effect.”
Even with the most thorough and well-defined hiring practices, the employees you hire will only bring their raw materials to the table. It is up to you and your leadership team to mold them and leverage their skills and talents to improve the company.
It’s a question of culture, and culture starts at the top of the organization. You have to set the values you want emphasized, communicate those values frequently and develop a system of accountability. Murray wanted client satisfaction to be the focus at the company moving forward, so he communicated and developed incentives around it.
“A lot of companies have great mission statements, have really good slogans and philosophies, but a lot of the behaviors at the top don’t back up the mission statement,” Murray says. “That leads to a loss of leadership’s credibility in the eyes of the organization. You have to keep instilling what you think is important, you have to keep reinforcing your culture with your behavior. You can’t tolerate bad behavior.”
To align incentives with the performance and values that Murray desires, the leadership team has tied a portion of the compensation system at the company to group performance. If a given unit performs at a high level regarding client satisfaction, the whole unit receives a bonus.
“People don’t want a substandard person on their team, so when you reward teamwork, you help enforce high standards across the board,” Murray says. “A lot of companies put an emphasis on awarding the most money to their stars, and they have a performance rating system where 70 percent of the company is rated as average. We don’t tolerate average, and our employees don’t either, because a portion of their compensation is tied to how their group does. No one wants to be average, because no one wants an average person bringing down the whole group.”
Use customer feedback
You can accomplish a lot by developing and enforcing high standards internally. But if customer satisfaction is the lifeblood of your business, there is no substitute for giving your customers a voice, and letting your company hear it.
If you want to know if you’re achieving customer satisfaction, ask your customers if they’re satisfied. Murray and his management team frequently meet with clients during stops at field offices. Once a year, the company holds a meeting of all staff members who interface with clients. During the meeting, Murray asks representatives of several client companies to take part in a panel discussion.
“We typically have three or four clients on a panel,” he says. “Those clients give their view of how we’re doing, how we could do better, and then they’ll answer questions from the people in the audience. We have a number of our major clients represented in that forum, and that approach has been very successful. Last year, we had a meeting in Detroit in a building attached to General Motors. When our people around the world hear our clients talk about what they like and how we can do better, it is a lot more effective than having one of us in management do it. It involves our clients in business, and shows our people that our clients want us to be successful.”
Building those bridges help engage customers and motivate the employees that you worked so hard to identify, hire and train. It is an example of perhaps your most important role in the living, breathing organism that is your company — that of connective tissue.
“Nothing is better than visiting with your clients,” Murray says. “It helps you assess yourself, it allows you to listen to what people are trying to tell you. A lot of cultures in business are based on the belief that you don’t want to tell the boss anything bad, so if you want the reality of the situation, you need to find out for yourself. You need to visit your clients and customers, you need to talk with them. You need to thank them for being your customer, build that relationship, then get an assessment from them on the service or product you are providing. That will help you get a feeling of whether the people in your company are telling you the whole truth about how you are serving your customers.”
How to reach: Resources Connection Inc., (714) 430-6400 or www.resourcesglobal.com
The Murray file
Born: New York City
Education: Accounting degree, California State University, Los Angeles; MBA, University of Southern California
First job: I worked in an A&P supermarket in New Jersey when I was 15 or so.
What is the best business lesson you’ve learned?
One of the most painful lessons I’ve learned is that you can’t change people. If somebody doesn’t have a sense of urgency, it is very hard to instill that in them. Over the long haul, you really can’t motivate low performers to be high performers, and you can’t teach talent.
What traits or skills are essential for a business leader?
You need to be a good communicator. You have to be intelligent enough to understand the environment of business. And you always have to be on the lookout for new ideas. Don’t become mired in the old way of doing things.
What is your definition of success?
If you look at the best athletes in the world, they are usually very well balanced. So my definition for success is being balanced. If you are serving your clients well, and motivating your employees, and all of that is in balance, the business is usually successful and you are pretty happy.
Ralf Drews doesn’t fit the profile of your typical company president or CEO. He doesn’t have a background in marketing or finance or sales or operations. He is an engineer and has spent many years working hands on developing new products. A day on the job for Drews doesn’t involve looking over spreadsheets or contemplating sales figures; it involves being out in the field at an oil pipeline or under the street in a sewage canal because that is where his customers work.
While Drews may not be concerned with sales figures and operating numbers, he does know product development and innovation, which is what drives his company forward. Drews is president and CEO of Draeger Safety Inc., a $1 billion manufacturer of gas detection equipment, air quality monitors, masks, and other safety and emergency products, and employs 400 people here in the U.S. and 3,800 worldwide.
Since joining Draeger more than 20 years ago, Drews’ product development leadership and innovative outlook has been responsible for 90 percent of the company’s product portfolio today.
“What innovation needs is people who can challenge each other,” Drews says. “Conflict must be wanted. New things must be wanted. Change must be seen as something positive, and if you generally have a good change DNA or change culture within your company, innovation is not an enemy but will support that.”
Drews’ drive and attention to innovation has helped create an environment that makes Draeger Safety’s products category leaders.
“The question always is when you come up with innovations, will there be customers who appreciate what you invented and come up with?” Drews says.
Here’s how Drews utilizes best practices for high-level innovation to ensure customers want and need Draeger’s products.
Understand your arena
In the 20 years that Drews has been developing products at Draeger, the one thing he has come to find is that innovation doesn’t just happen. You have to understand who you want to innovate for.
“What I have learned in my time as R&D manager is … many people thought that ideas are just coming out of the blue,” Drews says. “You just need to watch and observe and all of a sudden you get a sign from the universe and a new idea or new invention is born. This may happen in smaller businesses … but I believe in more mature organizations you need more structure around innovation and how to create innovation, because I think innovation does not happen by accident. Process, people and culture are the three elements that have to be designed in a way that they come together and then innovation can happen.”
If innovation is a key component of your business and you want to build your company around it, you need to have a focus for it.
“What you need to understand first of all is your market,” he says. “The blue ocean approach is one approach (that) clearly supports the logic to understand which arena you want to play. What’s your customer and what’s not your customer? You really need to draw the line. The first and most important step, and for most companies the most difficult step, is clearly focus where you want to go.
“That’s probably one of the most difficult things to do for people, because if you do that you also automatically exclude other applications. But what that gives you is a very clear focus and by having that focus you have a very good chance and a high likelihood that you can come up with something great. Whenever you want to do everything with one product the likelihood is very, very high that you come up with an average product or even with a loser product because that’s simply impossible.”
As soon as you determine who you want to serve, you can start to truly understand the customer’s needs — even the ones they don’t know about.
“A truly powerful innovation approach is to find out what are the articulated, but even more importantly, the unarticulated needs from a customer standpoint,” he says. “There are articulated needs — every customer knows this is a problem, it has been a problem that’s not been solved. There are also unarticulated needs. That’s where the problems would potentially lead to the biggest wow factor or to the biggest innovation.”
The key question is how much more value does a solved problem provide for your customer if it were solved.
“Does it enhance productivity?” Drews says. “Does it reduce costs and how much cost would there be? How does it impact the cost of ownership? What is the concrete value? We always try to attach a dollar tag to it. The second aspect is how expensive would it be for you to solve this problem? What we look at is actually the value from the customer perspective and how much R&D money we have to apply to solve the problem. Those are the two key questions.”
In Draeger’s case, the product is the spearhead, so it’s important for the company to understand how to innovate products.
“The market has to be very structured, very clear, and then basically, we send out people who observe and interview customers to really find out what are the needs and what are the demands,” he says. “Hopefully, they are able to find some unarticulated demands and needs, which could potentially lead to innovation.”
Create a voice of the customer
To find those unarticulated needs of the customer you have to get out in the field and see firsthand how customers work and how they use your products. That is exactly how Drews developed his latest innovation, the X-zone 5000 gas detector.
“I went out into the field and watched some practices in oil and gas and also in sewage,” Drews says. “Instead of talking to people, drinking a cup of coffee and eating some cookies, you really get into the dirt. You really want to understand how the people are dealing with your equipment. I went into the pipelines and into parts of the Hamburg sewage canals and I talked to the workers; the people who spend 80 percent, 90 percent of their work life underneath the street. They don’t really know what they don’t know, but by observing them and by looking at them and asking very specific questions you will find out whether there is something to improve with your product.”
Drews interviewed the person responsible for monitoring a manhole while people were working in the sewage canal pipes. This guy had to constantly draw samples of air from the canal because it can be toxic or have combustible gases.
“This guy used a small gas detector, and I was asking him what could be improved with this product,” Drews says. “He said, ‘Oh, this product is perfectly fine; there’s nothing that you could improve.’ I asked, ‘Why do you have this cable drum?’ He said, ‘The reason is very simple. It has happened in the past that the gas detector gets kicked into the canal because people walking by didn’t see it. What we do now is we connect the gas detector to this small cable drum so people can see it.’ I also asked him what he does when it’s raining because he is just standing there next to the manhole. He said, ‘Yeah, that’s a problem. Whenever it’s raining, I cannot get into my truck because the visual alarm is not bright enough and the audible alarm is not loud enough.’”
By asking a few key questions and watching what this guy had to do, Drews realized there were several ways to greatly improve the gas detector by making alarms brighter and louder and the unit more visible.
“Some of those questions we asked did lead to the X-zone, so we were basically discovering a problem, which he could not really articulate, but he was aware of,” he says.
In addition to research in the field, it is beneficial to create a voice-of-the-customer group to look at customer touch points, needs, and ways you can innovate and create more value.
“I recommend that companies create and build their own dedicated voice-of-the-customer groups within their companies because this is something completely different to a regular product management job,” Drews says. “If you want to be a good voice-of-the-customer marketing person, you really need to have some psychological skills, you need the ability to look behind the scenes, you really need to have the passion for interviewing people, and you have to have a passion for going into the real life environment.”
A critical part of the VOC process is assessing your competitors.
“What’s a target competitor in that specific region, vertical and application?” he says. “What’s the strongest competitor? Where does the competitor’s product really excel? And how do you want to compete against that? You have to make a conscious decision to focus on the strongest competitor in your target arena.”
Once you have found the needs of your customer and areas that your competitors overlooked, you have to find out if customers like the product concept.
“What you do at the end of this voice-of-the-customer study is you pre-sell your product,” he says. “At this point in time you have not even created a product development team, you don’t even know whether you want to develop that product. What you can do with all the things you found out in the voice-of-the-customer process is prepare a sales pitch like you have that product already. You present the features and the benefits your product has in a very nice way. Then you look into the eyes of the customer and if you don’t see the sparkles in their eyes and if they don’t ask, ‘When can I have it?’ You might not have a winner.”
Have an innovative environment
When Drews presented his concept for the X-zone, customers lit up and saw the value in owning the product. The success of this whole process is due in large part to Draeger Safety’s innovative environment.
“I don’t believe you just put people in a room and make sure they have a lot of fun and then finally they come up with an idea,” he says. “They might come up with an idea, but not necessarily addressing the problem you want to solve.”
To produce innovation in a very structured way people have to be focused and work together as a team.
“They have to be smart,” he says. “They have to know their stuff and they should be coming from different cross-functional areas. They should be very open-minded in their discussions. You have to have quick thinkers and problem solvers.”
These sessions should not be one day or two days long. They should be short one- to three-hour sessions.
“Don’t give them too much time,” he says. “They have to be efficient because ideas come up fast or they don’t come up. You’d rather repeat that. After you have pulled the people together and you have not come to a solution, do it again the next day or later that same day, but don’t give people too much time to come up with high-level innovation.”
High-level innovation starts with the culture. An innovative culture needs a lot of contradiction and people who can challenge each other but who can also admit when others have a better idea.
“What it needs is a culture of conflict, which means I must try to disagree with someone as long as it is for the right reason, which is to fault this product or problem,” Drews says. “One of the sayings I’ve heard a long time ago is, ‘Conflict is a lever for innovation.’ I really truly believe in that because if you have a challenge coming from the production side and that contradicts with purchasing and that contradicts with what marketing wants or that contradicts with what R&D is able to do and there’s people in the room who can discuss that and can accept each other and are open for dialogue and they really truly respect the other people’s opinions, perspectives and needs, then as soon as you put all of that together with people who are problem solvers, who are open-minded, who are quick thinkers and are smart and really know their stuff … you really get things going within an hour or a few hours.”
To keep an innovative environment and process flowing smoothly and successfully, it has to be supported by the entire organization.
“Whenever you have the people in one room I just described, that is really, really powerful. That’s something I would describe as culture and of course that goes all the way up, not just on an engineering level, marketing or product management level, but this has to be supported by the top management because culture is really driven from the top down.”
Once you have all these innovation processes working together all that is left is getting customers to see the value in your product.
“All the things which we have come up with from the VOC approach before we started the product development are basically reflected in what the customer feedback is and that’s pretty cool,” Drews says. “That tells you that you have a very robust innovation process and no longer is the result of your R&D process the result of hope and no longer do you rely on very talented or genius product managers, but you can make it a very structured approach to innovation and this process is sustainable and reproducible. It really works if you do it well.”
HOW TO REACH: Draeger Safety Inc., (800) 858-1737 or www.draeger.com/US/en_US/
- Understand who and where you want to focus your innovation strategy towards
- Get into the field and observe and ask questions of your target customer
- Create a structured, creative and contradictive environment
The Drews File
President and CEO
Draeger Safety Inc.
Born: Hamburg, Germany
Education: Engineering degree from the University of Luebeck
What was your first job and what did you learn from that experience?
My very first job was when I joined Draeger in 1991. I became a mechanical engineer, and what that job taught me was that I gravitated pretty fast to a leadership role. I was promoted just eight months after I joined Draeger. I also learned that my passion was not to design all the details but actually create ideas.
Who is somebody that you admire in business?
One guy I think very highly of is Steve Jobs. What he brings to the table is an outstanding empathy for customers. His understanding of customers is very good and that together with a very good understanding of complexity management and an ability to bring great talent to his company makes him strong.
What is your favorite business book?
‘Good to Great,’ that’s the only management book that has been a role model for me or has given me great guidance.
What Draeger Safety innovation are you most proud of?
The X-zone, definitely. A lot of that product goes back to my personal ideas and one of the most important patents is owned by me. Also, it’s a product that was relatively strictly developed in accordance with our VOC approach. This is not something that was an accident. It is something which was thought through very thoroughly and validated at each stage.