Mitch Lowe is not looking for sympathy. He just wants you to know that the rapid growth of Redbox Automated Retail LLC — going from a dozen kiosks to more than 27,000 locations nationwide where you can pick up a movie for a dollar — has come with a few challenges along the way.
“If you asked most people in business what you would be worried about, growth would not be one of them, especially in the economy we’ve had over the last couple years,” says Lowe, president of the $1.16 billion subsidiary of Coinstar Inc. “But growth brings on a whole set of challenges that are unusual and very complex.”
One of the most complex challenges is finding people to fill the constant job openings that tend to come about with a rapidly growing business.
“You need to hire people very quickly, and you need to work a lot harder than I ever expected in making sure you don’t cut corners in your hiring,” Lowe says. “You try to continue to keep your high standards as far as the people that you hire and the rigor that you put in finding people who are the perfect fit.”
With the popularity of Redbox, Lowe is not lacking for quantity when it comes to receiving applications for newly posted job openings. But the quality is sometimes a different story.
“When you are so attractive, you start to have a lot of folks who are trying to get jobs there who are really good at presenting themselves but are not so good at fitting in with the culture or the style of the company,” Lowe says. “When you’re trying to hire 50 people a week, it starts to get very tedious, and you see people inclined to cut corners.”
Lowe needed to find a better way to fill personnel needs at Redbox that would prevent the kind of compromises that could ultimately hurt the 1,600-employee company’s ability to keep growing.
Make it a team effort
The solution to the hiring conundrum, like everything else about Redbox, was arrived at in a flash. Implementation would take a little more time and effort, but the idea became apparent very quickly.
“We have always been a fast-action company, and I believe we did this within a couple days,” Lowe says. “You have to set up an environment where making mistakes is not something that you try to hide or are fearful of.”
The idea was to get more people involved in interviewing potential job candidates. It wouldn’t just be a single department head or a department head and a division president.
“We instituted this practice of 100 percent unanimity in bringing on any individual new employee,” Lowe says. “We had typically seven people across the company from all levels who would interview any new candidate from the person at reception to someone who works in the field to a VP to myself. And even if the hiring manager was 100 percent behind hiring this person, if the merchandiser who merchandised the jewel stores did not agree that this person should be hired, we did not hire this individual.”
The idea was to get more people to take ownership of the culture and the responsibility of bringing good people to Redbox.
“Everyone realized that I have as much to say about whether we hire the absolute best people that I can count on and can count on leading the company as anybody else does,” Lowe says.
The opportunity to be part of a job interview would be open to anyone. Actually, it was even more than that. It would become an expected part of your duties as an employee at Redbox.
“There are going to be people who don’t make themselves available to conduct the interviews,” Lowe says. “So you need to make it much like our jury system in the United States where employers are required to allow people to participate in juries. It has to come from the top, a very clear statement that the reason why we are doing this is so that, over time, we build an incredible group of people who are going to be dedicated to solving problems. It’s going to be a much more enjoyable place to work. In order to do that, you have to participate. You have to live up to the rules of this process.”
Lowe was confident that the collaboration and involvement of other people in the hiring process would make a big difference in the quality of people who were offered jobs at Redbox.
“It wasn’t just a poster on the wall that said, ‘We believe in integrity and humility and we believe in perseverance,’” Lowe says. “It was real and no matter where you were in the company, you were responsible for hiring people that lived up to those values.”
It didn’t all happen that smoothly, of course, and Lowe had a few problems to overcome to get this new employment interview protocol up and running. First and foremost was the scenario where a hiring manager didn’t get the candidate he thought was best for a position because someone from another department didn’t see it the same way.
“This was a very controversial idea,” Lowe says. “Not everybody agreed with it, especially the hiring managers who did not want to lose their authority in who they were going to hire. People imagined, and this actually came to pass, that they would be really sold on a candidate.
“This person was going to be working for them and an individual in the call center didn’t think this person represented our core values and vetoed the individual. There were all these debates that happened very quickly upfront. They got it out on the table. ‘I don’t think this is going to work because it is going to slow down our process,’ or, ‘I know best who I should hire and these others won’t.’”
Lowe reiterated his belief that getting more people involved in conducting interviews, even if those people weren’t in the same department as the position being hired for, was a good thing.
To further bolster his position, he referenced the book, “The Wisdom of Crowds,” by James Surowiecki.
“It’s the basis for our jury system and the basis for why democracy works,” Lowe says. “The core tenet is that a lot of people with some information on a topic, if they all get together and vote about what they believe in on a topic, they are more likely to be correct than if you put two or three experts on the topic trying to answer a question. … So that’s why we have this random group of people interviewing from different perspectives.”
A matrix was built that would list out categories of employees and the quantity of people that had to participate in the interview. It was done in such a way that interviewers would be chosen randomly by the human resources team, with anywhere from five to 11 people selected, depending on the level of the position.
“You have to be careful you don’t set it up so it can be manipulated and become a stacked deck,” Lowe says. “The trick is the hiring manager is not picking the people who interview the candidates because the hiring manager can be very biased.”
As much as Lowe believed this was a great idea, he did not force it upon the employees at Redbox.
“I have to show that I am not stuck and stubborn with my own preconceptions and my own ideas all the time,” Lowe says. “Only very rarely do I push through my own beliefs that might be contrary to others. Set the example that you are open to trying new things and new ideas and not being fixated on your own view of the future.”
He didn’t get everyone to agree with the plan. But through being transparent and willing to discuss the idea and answer questions, he was able to earn their support.
“When you have that consensus building, people say, ‘Well, I don’t agree, but the majority of you do and I trust you and I have faith in you, so I will try it.”
Perhaps the most important piece of this new hiring practice, aside from earning support for the idea, was to put employees in the best position to conduct good job interviews. The first point covered was critical if this plan was to have any chance of being a success.
“There was a stated rule at the very beginning of those meetings that no one was going to try to force you to change your mind,” Lowe says.
The reason this rule was so important was that there needed to be a way to resolve conflicts peacefully so that no one felt pressured to change their opinion for the wrong reason. If that wasn’t the case, the system would lose all legitimacy.
In addition to having the freedom to make their own choices, employee interviewers would also be free to come up with their own questions.
“We try not to script them too much in the way they ask their questions so we get all kinds of feedback from a different perspective,” Lowe says. “We encourage a free flow of questions.”
When an interview is completed, forms are filled out by the interviewer and turned into the human resources person managing the process.
“What they do is if there is more than the majority against hiring this person, we just move on to the next person,” Lowe says. “If it is one or two people out of five or seven or 11, then they will put together a panel to bring that group together to discuss the issues that they saw.”
It was some time after the system had been implemented that Lowe faced the very scenario his hiring managers had feared.
He had been looking to hire a senior vice president of purchasing for about a year and thought he had found the perfect candidate for the job. But out of the 11 interviews that were conducted, it was a near even split with people both for and against the candidate.
“So we got together, all 11 of us, and everybody explained why they were for or against,” Lowe says. “At the end of that, I could see pretty clearly that the issues that the people raised who thought the candidate wasn’t right for the role, they described things that I had not seen, but made sense.”
Lowe freely admits the decision frustrated him.
“I thought this candidate was perfect,” Lowe says. “What they taught me was that there are things, because of their unique perspective, things they saw that I did not see. And so we decided not to move forward with that candidate. It ended up taking me a whole other year to find the right person. It can be frustrating for the hiring manager, but you have to respect the process and respect the insights that come from the diverse interviewer. The other great benefit of this is that each individual feels that they play a big part in building the leadership and the teams across all parts of the company.”
There has also been a benefit to the people who have been hired under this system.
“We found the wider the range of people that did the interviewing, the more likely we were going to get employees that were going to stay longer, have more impact and have more fun working here,” Lowe says. “And it really has paid off. There’s just a whole sense of passion about Redbox and our mission from everybody, wherever you’re working at Redbox.”
How to reach: Redbox Automated Retail LLC, (866) 733-2693 or www.redbox.com
The Lowe File
Born: Omaha, Neb.
Education: High school graduate
What was your very first job?
Working as a demolition guy in a construction job. My job was tearing apart barns and removing metal roofs and that kind of stuff. It was fun because you could take a hammer and a crowbar and yell, ‘Timber!’ and watch stuff fall. I got this job from a friend of my parents who gave me the job as a favor to my parents to try to keep me out of the house during the summer.
My boss was this guy named Shorty, and he was never satisfied with the work that I did for him or the work that anyone did for him. It taught me a good lesson on how not to motivate and manage people.
Who has had the most influence on you?
One is Gregg Kaplan, the president of Coinstar Inc. What Gregg really taught me was analysis. If you want to continue to make decisions over and over again that end up being right, you need to do a lot of research and analysis and testing.
The other person was the person who was the co-founder of Netflix with me, Reed Hastings. He taught me focus. Focus on the big things. Focus on the things that could change the business in a big way. Leave the small things for later.
Who would you have loved to have dinner with and why?
It would be Thomas Jefferson. He was such an innovator and such a great creator. He was always devising tools and equipment to solve problems and he lived in such a turbulent time. I would love to see what was going on in his brain.
Mark Reynoso could hear the rumble approaching on the horizon, and he knew it spelled trouble for Belkin International Inc. Competition was growing fierce in the consumer electronics industry and if he didn’t act fast, he and his business were going to get run over.
Belkin launched as a seller of computer cables and surge protectors. But the business evolved into products that make electronic devices such as laptop computers, iPods and eReaders easier for consumers to use and easier to integrate with other devices.
As the calendar turned from the 1990s to 2000, the company of more than 1,000 employees found it wasn’t alone anymore in this realm. Belkin was facing more and more competition and Reynoso needed to respond to help his company stay ahead of the pack.
“We saw that the retail market, the shelf space that our products lived on, was becoming more competitive,” says Reynoso, the company’s president and CEO. “Not only were we competing against other brands like Belkin, but retailers began to develop their own private brands to compete with people like Belkin.”
Companies such as Best Buy and Circuit City were now in the market offering their own specialized electronic connectivity solutions. Reynoso feared that without quick action, his products were at risk of being moved to the back of the shelf or even getting bumped off completely.
“It became really clear that we needed to push our organization upstream in terms of our innovation capabilities to really continue to put ourselves in a space that was ahead of the commoditization curve so that we’re bringing new products to market and creating new categories that would allow our brand to maintain its relevance and strength,” Reynoso says.
“Our goal was not just to sustain our business; it was to grow and expand our business. The only way we would be able to do that was if we were bringing differentiated solutions to the market that people really cared about and that consumers loved.”
Make a commitment
Reynoso reached out to his people and explained the dire circumstances. He told them that they all needed to work harder to come up with new and innovative products that would excite consumers and help Belkin stand out from the competition.
The plea did not go over well with his employees.
“Initially what we discovered when we tried to inject this way of thinking into our business was that it was really hard to get it to take hold,” Reynoso says. “People were running their day-to-day businesses. It was hard to get them to change gears and change focus and begin to develop some of these new strategies.”
The response underscored the fact that the increased competition wasn’t due to a lack of effort from his employees. They were working hard and didn’t have much capacity to take on additional tasks.
“So then to say to somebody, ‘Hey, I want you to go kick off this new initiative because we’ve discovered a customer need,’ it would be really difficult to make that successful,” Reynoso says.
He had shown them that he understood the environment in which they were working and was willing to adapt that environment to make this new initiative possible.
“You have to have the conviction to stop doing certain things if you want to do new things,” Reynoso says. “One of the CEO’s primary responsibilities is to set priorities for an organization. Something is going to have to fall off the list. The biggest thing you can do is remove barriers.”
Innovation was desperately needed at Belkin. Reynoso knew he had the talent on hand to be innovative and develop new products that would excite consumers. It was time for him to give that talent a chance to blossom.
His idea was to create an entrepreneurial program in which selected leaders in the company would be given a chance to take an idea conceived by the consumer insights team and develop it into a great product for Belkin.
“Every company has their bureaucracies that are designed to make them more process-driven, efficient and effective,” Reynoso says. “Start-ups succeed in part because they don’t have any process. Everything is done pretty much in an ad hoc, entrepreneurial fashion. The best thing you can do for somebody in that situation is to put them in an environment that liberates them from a lot of the structures in your organization and truly gives them the freedom to be completely entrepreneurial.”
This program would solve a big problem for Reynoso. Employees chosen to take part in it would be freed from other responsibilities and given a chance to dedicate all their time to the new project. The excuse of not having enough time or resources would no longer be valid.
“We’re going to allow entrepreneurs within Belkin along the lines of this vision and future that we’ve talked about really push the needle of our innovation profile,” Reynoso says. “We’re going to fund those ideas, we’re going to fund those entrepreneurs and we’re going to allow them to work within our corporate development group. We’re going to cocoon or isolate them so that they can really focus in exclusively on nurturing their specific idea.”
Connect with your customer
With the framework of his entrepreneurial program in place, Reynoso needed a great idea to hand off to one of his fresh-faced entrepreneurs. A scan of the marketplace revealed that laptop computers might be a good place to start as they were becoming really popular, particularly for home users.
“We recognized that we were going to need to understand consumers’ needs and preferences in order to create new solutions or categories that would allow us to drive growth,” Reynoso says. “A real direct result of that discussion was our commitment to begin to disproportionately invest in and become experts in our consumer research and consumer insights.”
Reynoso made it clear to his employees that ideas would be given the opportunity to breathe and grow at Belkin. In order to do that and begin the entrepreneurial process, he and his consumer insights team had to identify an idea with great potential. He had to reach out to consumers and figure out what would get them excited.
If he was lucky, the team would stumble upon an idea that consumers didn’t even know they needed.
“That’s really the gold mine for us,” Reynoso says. “It’s a need that a consumer can’t articulate because we’re solving a problem that they didn’t know they had. When we’re mining for unarticulated needs, you can’t ask them direct questions. You need to spend time understanding broadly how they live and how they use the product and the pain points they have with it.”
Whether you’re reaching out to people through a database of customers who have bought products from you or you’re flipping through the Rolodex on your desk, you need to get inside the heads of the people who use your products.
“If we’re learning about laptops, what do you love about your laptop?” Reynoso says. “How do you use your laptop? Where do you use your laptop? What is it you don’t like about how you use your laptop? The more data you gather in that respect, certain trends and themes will begin to emerge that will give you a hypothesis to begin to innovate around. That’s how you tackle unarticulated needs.
“It doesn’t need to be complicated. The key is less about the sophistication of the system versus the sincerity of the conviction to make it a priority for your business. What you need to figure out is the best way for you and your company to engage your customers.”
You’ve got to show customers that you’re genuinely interested in their feedback and that their responses will play a key role in the product decisions you make.
“Be really clear in communicating your sincerity of your objective of what you want to achieve,” Reynoso says. “Then make sure you listen and deliver. There’s nothing worse than taking up somebody’s time and then effectively ignoring their recommendations.”
It’s the kind of thing that will drive your customer to a competitor.
Through its commitment to intensive research, Belkin came up with an idea that Reynoso and the consumer research team believed laptop users would love.
Find the right person
It was now time to find someone to lead the initiative to develop a product related to laptop computers that would excite Belkin consumers and serve as a springboard to even more innovation.
“You have to identify a vision and you need to go make some quick wins so people can see that direction is a good direction,” Reynoso says. “When people see it, they’ll follow suit. It’s like Roger Bannister and the four-minute mile. Until somebody does it, it seems impossible. Then as soon as somebody does it, people can see that it’s real, it’s achievable and it’s possible. You have to go from something that appears to be not possible to something that was done so they can see that it can be repeated.”
In order to make the initiative a success, you need to think beyond just the technical expertise in whatever realm you’re asking this person to work in. You need to look at their ability to work in an entrepreneurial fashion.
“Somebody who is very structured, process and rules-driven is not somebody who you want in start-up environment,” Reynoso says. “There are people who thrive on innovation, thrive on the ups and downs and don’t require a tremendous amount of management to work through the hiccups that you’re inevitably going to have. They recognize it’s part and parcel of the path that needs to be taken.”
Use your HR team to identify people who have the personality and temperament to take on leadership roles.
“If your HR organization is focused on developing your people and caring about your people, usually that tends to be a correct recipe,” Reynoso says.
Once you put the person in place, you have to live up to your promise and your intent to let the person be a leader in developing the initiative.
“You can tell somebody, ‘Hey, we’re going to be supportive of you when you make mistakes or when there are failures,’” Reynoso says. “OK, great. But they are going to test it when it happens. They are going to want to see that when a failure occurs and there is a setback, you truly are willing to support them. We have a good track record of being able to say, ‘OK, you fell down. Pick yourself up, dust yourself off and move forward.’ Don’t nickel and dime them.”
You should also understand that any plan is likely to go through changes and perhaps even complete transformations over the course of development.
“I don’t recall what the initial assumptions and expectations were for the laptop at home business when we initially put together the business plan,” Reynoso says. “But I can promise you what ended up being successful was only half of what we originally wrote down. We just had to give our leader the freedom and the empowerment to go to make mistakes.”
What Belkin came up with was the Cush Top, a product that would help laptop computers keep their legs cool while using their computers.
“It’s an ergonomic, comfortable laptop stand that you put on your lap whether you are in your bedroom or your living room or wherever you are,” Reynoso says. “That was one example of innovation driven through consumer insights that was a huge home run for us.”
The work also produced a product called Home Base that would connect computers, printers and any other USB device in your home. Consumer research discovered that connectivity was a big issue for many people.
“Collectively, those insights drove our laptop at home initiative that basically allowed us to create a new business that is now in excess of $100 million,” Reynoso says. “Had we tried to drive that through our existing businesses, it probably would have failed because everybody was so busy with everything else they were doing. That dynamic is more true now than it was seven or eight years ago.”
How to reach: Belkin International Inc., (310) 751-5100 or www.belkin.com
The Reynoso File
Born: Addis Ababa, Ethiopia
Education: Bachelor of arts degree, law and society, University of California, Santa Barbara
Who has been the biggest influence on your life?
My parents. They just really taught their kids to understand what right and wrong was and tried to make sure they behaved accordingly. Just a real ethic, a moral grounding was what they brought to us.
Reynoso on making the right personnel choice: You don’t want to pick somebody who is doing really well and put them in a job where they struggle because now you’ve made two big mistakes. You’ve taken somebody who was successful and made whatever they were doing less successful because you pulled them out of that.
Then the initiative you wanted to do is now not going to be successful because you put somebody in there who isn’t going to be successful. And now you’ve got an employee who was feeling really good about themselves being successful who is now struggling. It’s a real disaster in that respect. You just want to be really careful you don’t misalign opportunities with roles.
What one person would like to have a conversation with?
Nelson Mandela. For somebody to go through the life that he did, to be imprisoned by his own country because of the color of his own skin, to be willing to struggle for freedom and to then embrace the society that imprisoned you and lead that country as he did out of apartheid, it requires a depth of a person that is really hard to understand. He would be an incredible individual to be able to spend some time with.
When A.G. Lafley became Procter & Gamble’s president and CEO in 2000, the company had 10 billion-dollar brands. When he retired from his position as chairman, president and CEO in 2009, the company had 23 billion-dollar brands. Viewed as one of the best chairmen and CEOs in P&G history, Lafley accomplished what he did through a focus on innovation and the consumer.
Four billion times a day, P&G brands like Gillette, Old Spice, Tide, Charmin, Pampers, and Duracell touch the lives
of people around the world. Lafley and Chris Thoen, former director of innovation and knowledge management at Procter & Gamble, spoke last November at the Ernst & Young Strategic Growth Forum in Palm Springs, Fla., to share their insights into how innovation and consumer focus has been the key to P&G’s success.
“The biggest decision we made was to move to an open innovation platform,” Lafley says. “The problem at P&G in 2000 was not that we weren’t inventive. The problem with us was that we weren’t turning that invention into innovation that created customers, that benefitted customers, that created value for customers or a better experience for customers, and that’s all I wanted to do.”
The drive and focus on innovation Lafley instilled in the company during his time there is now one of the most important aspects of the organization’s business.
“Our belief is that innovation is the way for a sustainable competitive advantage and business growth,” Thoen says. “Everyone in the organization breathes it in and out every day. At Procter & Gamble, we see it as the cornerstone to develop the best possible products for consumers everywhere in the world. Innovation has been a great game changer at P&G, especially over the past 10 years.”
P&G had net sales of $78.9 billion in fiscal 2010. Here is what Lafley and Thoen had to say about how the company’s biggest advantage is its ability to innovate.
Innovate for the consumer
P&G innovations have become so successful and a part of people’s daily lives because the company innovates its brands with the customer in mind 100 percent of the time.
“I’m a big believer in pushing the idea, the innovation and the technology in front of the prospective customer very early in the process,” Lafley says. “I learned this working with a lot of very good design shops. We used to spend way too much time and way too much money designing and engineering pretty ornate prototypes. I pushed us to prototype very quickly and prototype very crudely. Consumers are smart. … You just want them to get the idea.”
Not only does P&G innovate with the customer in mind, but it strives to understand its customer base for new products.
“For us, the consumer is the boss,” Thoen says. “It’s the consumer that hands over the money to the cashier and makes a choice to buy a product of P&G or a competitor’s products. So for us, it’s really important to understand what the consumer wants and to be able to deliver that experience. That means understanding the consumer fully. To go forward with that, it’s finding the best possible innovations to put those into the products.”
Once consumers grasp a concept for a product, you have to test it to see if the product holds true to its purpose in a real situation.
“I also believe in getting into some kind of transaction test,” Lafley says. “You don’t know if you have something until somebody will part with some money. You can run all kinds of research and people will say that they are going to do something, but you can’t believe any of it until you actually have to reach into their pocket and pull out hard-earned money, hand it to somebody else who is going to take it away from them and then get that product to try it.”
Innovating products that customers can’t live without doesn’t come without trial and error. You have to be willing to fail and work until you get a product that consumers want.
“The failure rate is high; that’s part of the game,” Lafley says. “Many fail multiple times. We just introduced a new chemistry foam-based feminine hygiene product that we worked on for 13 years. We failed so many times with that technology I can’t even tell you. But we stuck with it because we knew if we delivered it, it was going to deliver protection and security that no other existing technology could come close to. You’re going to fail and you’re going to fail multiple times. I always encouraged fast failure and I preferred cheap failure. I didn’t want to drop $50 million or $60 million. That’s a high price to fail even for a company with deep pockets.”
You can’t underestimate the importance of being able to innovate. You have to identify innovations that will help your business keep growing well into the future.
“As I’ve looked at a number of other industries, virtually all the value gets created by innovation,” Lafley says. “At our company, all of our revenue growth was either organic innovation — serving new brands or new products or better products and improvements in existing brands — or it was acquiring. In our view, an acquisition was a platform for future innovation. We didn’t buy Gillette because we wanted their male shaving business. We bought Gillette because we thought Gillette would be a fabulous platform for male personal care innovation for the next 50 or 100 years. Innovation drove everything.”
Hunt for innovation
Innovation isn’t always easy to come by. You have to be willing to ask for help and let partners in business know that you are innovating.
“For us, it’s tapping into a network of partners, ecosystems, and they range from the individual, the innovator, inventor, to small and medium enterprises, to big enterprises,” Thoen says. “Where the innovation comes from is not important. It’s finding it, doing the right thing with it in our context, putting it in the right products, and then delivering that innovation to the consumer.”
Even if your business is a known leader in innovation, you have to let it be known that you are looking for assistance with new innovations.
“I think we are still trying to get the word out,” Lafley says. “We did all kinds of things. We got a lot closer to our customers and I mean our retail customers, our distributors. We reached out to universities and research laboratories and we tried to get the word out to individual entrepreneurs. One of the things we did was we ran these big innovation fairs. We would run it for two or three days and it was sort of, you had to give if you wanted to receive. So we would show off some of our technologies that we were looking for partners on. Then we would invite people in to show off theirs. It starts out with making a couple of connections, ‘Gee, maybe I have an idea you might be interested in’ and you talk to a third party.”
P&G has a huge network of past and present employees, and it puts that network to good use.
“An amazing source for us was the thousands of people who had worked for P&G that had moved on and I reconnected with them,” Lafley says. “Believe it or not, former P&Ger’s around the world get together and they have these big events. They created a community where they connect on business ideas, they connect on entrepreneurial ideas and they connect on innovation and we started getting a lot of leads from former P&Ger’s, colleagues of former P&Ger’s, and friends of former P&Ger’s.”
The company also utilizes its websites to gain ideas. You have to use all your resources if you want to find the best innovations and ideas.
“We pose those same needs on our PGConnectDevelop.com website,” Thoen says. “A lot of people can go and visit that web site and say, ‘I think I have a solution for you.’ They then submit their idea onto the website. Within P&G, we have a back store process to go in and evaluate those ideas and see if they fit with our strategy and what we want to do. Once those ideas come in, we also have a commitment to those partners that have submitted those ideas to come back to them within a very reasonable time frame, four to six weeks, on whether or not this is an idea that has traction within the company and we want to move forward with it.”
To find or develop products or services that will become true game-changers, you have to be able to get different view points on that innovation.
“All innovation comes from people and you have to open them up and you have to open up to the world around you,” Lafley says. “All innovation comes from either a person or a small group of people making unlikely associations or connections that others don’t make. Everybody’s going to be looking at it, but you have to see it in a way that’s slightly different.”
Find what consumers want
To build upon your innovation, you have to know what consumers are looking for and what you can do to give them what they want. You have to know what products are and aren’t the right fit for your business.
“It’s clearly important to define what are the areas where we want to play and the areas where we don’t want to play,” Thoen says. “For many years, this was all about physical products, consumables. Those will continue to be important, and we have significant business units where we have developed a strong portfolio of products and will continue to strengthen the performance of those products and make sure they have the right value. But what we’ve found is that the consumer is not only looking for products, they’re looking for services. So as we set ourselves up for success in the future, we need to make sure that we follow that trend into the market and make sure that we don’t only have consumables but also have the right services.”
As you try to develop future endeavors you have to devote the time to those projects to make sure they fit.
“One thing you have to keep in mind is how do you balance the return from the present with the investment of the future?” Lafley says. “The other is what business are you in and what businesses do you want to be in and what businesses should you not be in and they are kind of related. I spent a lot of time with what businesses do we want to be in. And I spent a lot of time on making sure that we were putting enough resources, not just financial resources but human resources, in partner investment and acquisition investment for creating the future. I probably spent a third of my time on people development and talent allocation. I easily spent a third to a half of my time on innovation for the future and creating a strategy and a platform for the future.”
A big part of what an innovator does is create something that builds a relationship, creates a better experience, delivers some value and creates trust over time.
“We have a very simple business model in most of our businesses,” Lafley says. “We try to create a brand that makes a promise that you’re interested in and a promise that will make your life a little bit better. We try to deliver a product that delivers better value and a better experience in performance value. Then we try to generate some trial. We try to get some people who we think are most interested or most in need of the brand or product to try it. Then we hope that you like it enough and you come back and try again and will use it on a regular basis. That frankly, is our game and that’s the secret of success to our brands. They have higher trial rates and they have higher usage and loyalty rates and that’s what makes it go.
“At least with consumers, a successful brand is a promise that’s kept. A successful product is a promise that’s kept. If you can take it one more step and add some delight, I not only kept the promise, but I delighted you in some unexpected way then you’re off to the races. That’s what you’re trying to create.”
HOW TO REACH: Procter & Gamble, (513) 983-1100 or www.pg.com
The Lafley File
Former chairman, president and CEO, Procter & Gamble
Born: New Hampshire
Education: Bachelors degree from Hamilton College; MBA from Harvard University
Experience: He joined Procter & Gamble in 1977. He was named a group vice president in 1992, an executive vice president in 1995 and president of global beauty care and North America in 1999. He served as president and CEO from 2000 to 2009 and was elected chairman of the board in 2002.
Accolades: During his leadership, sales doubled, profits quadrupled, and P&G’s market value increased by more than $100 billion dollars.
He was named “CEO of the Year 2006” by Chief Executive Magazine. He received the 2010 Edison Achievement Award, an annual award recognizing leaders that have made significant and lasting contributions to innovation, marketing and human-centered design throughout their careers.
The Thoen File
Former director of innovation and knowledge management, Procter & Gamble
Education: Masters degree in science and chemistry and a Ph.D. in biochemistry from Universiteit Antwerpen
Experience: He joined P&G in 1988 as an R&D scientist for Fabric and Home Care. In 1993, he became section head of R&D for Fabric and Home Care. In 1997, he was named associate director of R&D for Fabric and Home Care. In 2003, he was promoted to R&D director of technology for Fabric and Home Care. In 2007, he was named Personal Health R&D director. In 2009, he became the director of innovation and knowledge management.
Albert Pujols is one of 1,600 employees who work for St. Louis Cardinals LLC, but it’s safe to say he’s quite a bit more famous than just about any of the others. And while his colleagues with the ballclub understand that professional baseball players, like other pro athletes, make a lot more money than the average American worker, it can still lead to occasional feelings of envy.
“Most people in the front office are aware that it’s two different economies under the same roof,” says William O. DeWitt III, president of the Cardinals. “But some people have a hard time with that. Some employees have a hard time with that. They see millions going to players, but then in the front office, it’s the real world as to how people are incentivized and compensated and things of that nature. I would say that would be one of the key leadership challenges of my job.”
And before you turn the page because you think this story does not apply to you, you should realize it’s an issue that can crop up in pretty much any kind of business.
“You see it particularly flare up as it pertains to sales folks versus nonsales folks,” DeWitt says. “Typically, in most businesses, the sales function has a different set of incentives and compensation features than non-salespeople. We call them revenue generators versus non-revenue generators in our business. I mentioned the difference [between] front office and players. Probably the more appropriate distinction is between sales and nonsales.”
You don’t have to be an expert in human relations or business culture to recognize that when you have a divide between groups of employees, it’s not healthy for your company. Here are a few things DeWitt does to bridge these gaps and keep everyone working toward the same goal of providing winning baseball on the field and exemplary customer service off of it.
Even the novice baseball fan understands that if it’s a tie game and there is a runner on third in the bottom of the ninth inning, it’s the batter’s job to get that runner home and end the game. Unfortunately, it’s not always as easy to identify job descriptions in other lines of work.
This includes the business side of the St. Louis Cardinals.
“We brought in a consultant to help us really understand our salary structure and our benefit structure and really just benchmark where we were with our front office,” DeWitt says. “It’s been a nice tool to be able to more clearly articulate what our structure is, why it is that way and what sort of changes we may need to make in that structure to give people confidence that there is rhyme and reason to the approach.”
The problem for DeWitt was the team couldn’t always give good reasons for making one compensation decision or another because no one had really spent a lot of time studying what the Cardinals’ peers were doing.
“We were having a hard time explaining our structure to people, because we weren’t 100 percent sure what the true marketplace was,” DeWitt says. “So that was something that bubbled up through the HR department.”
DeWitt wanted to know that the way the Cardinals were compensating people was consistent with his peers in terms of what employees were doing and what they were receiving for that work.
In addition to gathering data through a series of surveys and benchmarking studies done by Major League Baseball and other firms in St. Louis and across the country, DeWitt launched an effort to get everyone to compose a personal job description.
“We had everybody think about that and had their managers approve their job description,” DeWitt says. “So it gave everybody in the organization a chance to write down what they were doing and what their functions are in the company and the managers signed off on it. That provided the foundation for this benchmarking.”
DeWitt’s goal was to take an honest look at where the Cardinals ranked in terms of salary and benefit structures with its peers. So that’s exactly what he told employees when introducing this idea of composing job descriptions.
“We were just honest about it,” DeWitt says. “We said we want to understand the salary structure and where we fit in. There’s a level of trust between employee and management that goes back a number of years in that we’ve had some success on the field as well as off the field in growing the brand and growing the business.
“I could see where in a struggling business, employees might be skeptical of that figuring there is a right-sizing type of exercise going on. We were clear that that was not what this exercise was all about. We were just honest and upfront and that worked out well.”
DeWitt and his team took the job descriptions that had been composed and the data gathered about other organizations in terms of salaries, benefits and bonus compensation plans and began to get a better sense of where the Cardinals fit in when compared with its peers.
The project is ongoing, but DeWitt says he likes the direction it is heading.
“Between salary, bonus and benefits, you’ve got a full picture of how front office people are compensated,” DeWitt says. “It’s a much better way of having that conversation with employees than just having to be defensive about what Albert Pujols makes.”
When he does face more questions about perceived compensation inequities, DeWitt says he will often give people the option to try something new.
“Let’s say they are not in sales and they are probing about what is different about the compensation structure,” DeWitt says. “You just say, ‘If you want to be in sales, you’re welcome to try it.’ I think that’s one of the things we’ve tried on a few occasions. Some people have said, ‘Maybe I will give it a shot,’ or, ‘No, that’s not for me.’ They understand that there is no prejudicial approach, it’s just form following function in the way we set up compensation structures.”
Recognize all the parts
You could have the greatest starting pitcher in all of baseball on your staff, but if the rest of the rotation is terrible, you’re not going too far with your team. It’s the same way in business when it comes to completing projects.
“We have a number of people that are on the sales side, for example in corporate sales, that try to land a deal,” DeWitt says. “But there is also a servicing aspect. Once you’ve done a deal, that’s great. But we need to deliver all these assets to people as part of these agreements.”
So before you offer up a gold watch or use of the company jet to your top salesman who sold a major deal with a client, take a moment to look at the work others do to give that client the most bang for their buck.
“A company might have a sponsoring package with us, a day at the ballpark where all their employees come and get a breakout session where they might have a batting practice on the field,” DeWitt says. “That requires execution from our staff. You have operations people that work with the facility vice president and they need to help with prepping the field and bringing out the equipment and doing all that. The servicing people on the corporate sales side have to be there and walk the customer through the event. Obviously, the salesperson is going to be part of that. But it’s a team effort, not so much in closing a deal but in delivering the assets. A lot of things require a lot of teamwork around here. That helps foster that and breaks down some of those walls that would otherwise exist.”
The answer is pretty simple: Show appreciation to those unsung people who aren’t on the front lines of closing the deal but still play an integral part in getting the client what they paid for.
“Just acknowledging it is a big step in the right direction for that issue,” DeWitt says. “Telling an employee that they are giving the extra effort and it’s appreciated. That’s half the battle in terms of employee relations. … We try to give everybody in the organization a sense they are part of the overall goal of servicing the customers and getting more fans to the ballpark.”
Know your role
DeWitt does not turn away employees who have concerns, even if those concerns seem pretty minor at first glance. At the same time, he doesn’t always launch an immediate investigation into every problem that gets brought to his door.
“Generally speaking, you want employees to solve their problems themselves,” DeWitt says. “If they are running into a problem getting that done, even if it’s somewhat trivial, I’m not going to just send them back out to solve it. I’ll work with them. But you want that bar to be reasonably high for them to come in to see you. Otherwise, you get a lot of little issues that might otherwise have been dealt with at a lower level.”
DeWitt makes it known that he is available to anyone in the Cardinals organization at any level.
“Make sure the people who report directly to you understand that you’re always going to take a phone call from someone within the organization at any level,” DeWitt says. “Then you’re not undercutting them, because it’s always been your policy. That’s important.”
One technique you can use to make that kind of undercutting less likely to occur is to put the person who is complaining in your shoes.
“You say to them, ‘If you were me, what would you do with this problem?’” DeWitt says. “That gets people to think in a different way about the problem they are part of. ‘Do you want me to address this with your supervisor or do you want to see if it gets better before I get involved? Do you want to try a different approach before I get involved first?’
“Those are the kinds of things that when employees have raised problems with me, hopefully that’s a fresh way to think about it. Sometimes it leads to resolution; sometimes it doesn’t. But it’s a good start in terms of looking at it and maybe getting it solved before you have to address things head on.”
Posing questions is also a good way to make sure that you’re not missing problems that may be festering in your company without your knowledge. Instead of asking these questions to people who are bringing you a complaint, sit down with someone who you trust to give you good feedback and honest answers.
“Particularly your most trusted employees that you don’t have performance issues with at all,” DeWitt says. “Getting advice from those employees about how you could communicate better or get better feedback from others, that’s an important thing to do. Sometimes you need to put your ego aside in that instance. If you’re the president of the club, people aren’t just going to serve up advice. But if you’re open to pulling it out of people a bit, you can learn a lot about how effective you’re being.”
How to reach: St. Louis Cardinals LLC, (314) 345-9600 or stlouis.cardinals.mlb.com
The DeWitt File
Education: History of art, Yale University; Harvard Business School
Talk about the connection between your family, baseball and the cities of St. Louis and Cincinnati: My grandfather was in baseball here in St. Louis his whole life. He grew up as a treasurer for the Cardinals and worked for the Browns and moved on to a bunch of different things in baseball. One of which was he got involved with the Reds as a general manager and owner in the early 1960s. So my family moved to Cincinnati from St. Louis. Then when my father got involved as chairman and led the ownership group in 1996 in St. Louis — it was sort of a homecoming.
What is your best memory with the Cardinals?
It would have to be the World Series victory in 2006. That was just a great moment for us.
Who has been the most influential person in your life?
I would say definitely my father in terms of that direct relationship and the fact that he has a certain personality and style that I’ve emulated to some extent. He’s very much a leader by example, sort of quiet, but prepared and very passionate. Those are the qualities I try to emulate with a slightly different style.
Whom would you like to meet?
It would probably be Branch Rickey, who gave my grandfather his first job. He was a legendary figure in the Cardinals organization and the times were so different back then in terms of what baseball was all about. And yet he was trying to win the same game. To compare and contrast what we deal with versus what he was dealing with that many years ago would have been a neat thing to probe.
Over the last few years, Gary Sasso saw his law firm facing two substantial and markedly unique challenges. The first was universal: a worldwide economic downturn that impacted markets and businesses all over the globe, including his company, Carlton Fields, and its clients. Though the second challenge was limited to his firm, it was equally disconcerting.
“Maybe the most significant challenge to continuing to grow is one that people don’t talk about very much, but it’s complacency,” says Sasso, president and CEO. “It’s being satisfied with past success. We had been successful before the downturn and during the downturn, and there’s a temptation to be satisfied with that and complacent, but this is not a destination. It’s not about hitting this growth target or that growth target. It’s a journey. It’s about being committed to continual improvement.”
Sasso realized it was the combination of these challenges — the external economy and internal complacency — that had the real potential to hold Carlton Fields back from continued success. He also realized that while the two problems were different in nature, they in fact shared a common solution: growth.
Rather than retrench, Sasso led Carlton Fields to focus on growing throughout the recession. As a result, the firm’s significant growth in 2009 made it an economic success story and one of nation’s fastest-growing companies on the Inc. 5000 list that year. In 2010, Carlton Fields generated $154 million in revenue. Now, in 2011, Sasso still hasn’t lowered his sights.
“We’re a fairly small piece of the overall economy and we don’t need that much more than our share to be successful,” he says. “So we just stay focused on growth relentlessly.”
Focus on service
Coming into the downturn, Carlton Fields was fortunate to be in a position of strength. Yet one drawback of having financial security is that employees can get into a comfort zone and they don’t feel driven to adapt and be proactive.
So rather than have people focus on the larger goal of growth, Sasso kept his team rallied around the more tangible goals of providing best-in-class service and adding value for clients.
“The economic climate can provide obstacles but also opportunities, because all of our clients are struggling to deal with the downturn and they need help,” Sasso says. “The firm that steps up to the plate to provide that help has an opportunity, and that’s the way we’ve chosen to look at it.
“Our overarching goal is really to provide best-in-class service in every area where we practice and to have the best of all worlds, not to accept false tradeoffs among our clients and shareholders and employees. That’s a guiding light for us and we test our goals against that vision. We do that first and foremost by talking to our clients to make sure that we understand their businesses and their needs.”
To furnish value-added solutions for clients whose businesses were impacted by the economy, Sasso encouraged Carlton Fields’ attorneys and staff to utilize internal meetings and sessions with clients to brainstorm creative ways to handle client issues. Providing these opportunities for employees to be resourceful and collaborative supports the kind of proactive, idea-driven culture that enables growth.
“When you’re in the midst of such change and evolving economic and legal circumstances, you have to be innovative to tackle new problems and new challenges,” Sasso says.
“We spent a great deal of time talking to our clients, meeting with our clients, asking them about their business, asking them how they were being affected by the downturn and taking the time and trouble to change the services that we provided to meet our client’s evolving needs.”
When you frame goals for your team around improving services and developing client relationships, you ensure there is never a point where people feel like they’ve maxed out opportunities to grow. At Carlton Fields, having best-in-class service is a goal that requires continuous improvement because to meet client needs better than a competitor, the firm has to adapt as those needs are constantly changing.
“When I talk about growth I’m not talking just about growth in revenues or numbers of people or numbers of offices,” Sasso says. “When we talk about growth here, we’re really talking about growing the strength, depth and quality of our firm, which can be reflected in numbers, but it’s not just about numbers. It’s about quality.
“We looked at what was happening in the economy from our client’s point of view and asked how was this affecting what they needed from us? We launched a full court press to anticipate what our clients’ needs were and we undertook to meet those needs.”
Don’t compromise people
Engaging employees in success is one of the key ways to affect growth. Although Carlton Fields has incentives in place to recognize and reward exceptional performance from team members, Sasso says that nonmonetary motivators such as job security, inclusiveness and transparency are just as important if not more so in keeping people committed to the vision and striving for excellence.
“We’ve tried to motivate employees by being successful as a business and as a result of that we have not had to engage in layoffs of staff or attorneys, which makes us relatively unique among law firms I believe,” Sasso says. “And that’s a big motivator — where we can provide a secure place of employment for our employees.
“We motivate people by means other than money or economics. We try to engage everybody in the success of the firm. We value everybody here. We reach out to everybody and include them in discussions about how the firm is doing.”
Making sure people feel recognized and valued is vital if you want them to give their best efforts and drive growth. When people don’t feel appreciated, it’s not long before dispirited becomes dissatisfied and they are doing the bare minimum to collect their paychecks.
To fight complacency at Carlton Fields, Sasso shows his team that security and growth can go hand in hand by letting them know that even though growth is the goal, they are the priority. He refuses to make tradeoffs for growth — financial or otherwise — that come at the expense of the firm’s employees. That’s one reason why, by each category on the whole, Carlton Fields’ shareholders, associates, special staff and all employees have been able to maintain or improve their compensation through the years, even through the economic downturn.
“We reject false tradeoffs among clients, shareholders and employees,” Sasso says. “There are some who argue that you can only promote the interests of your clients, your shareholders or your employees, but not all at the same time, and we reject that. We have to be attentive to the needs of all of them and then we’ll be able to serve each of them.
“I think you have to try to ask and understand what are your goals for each. What is a home run in each area? And then work hard to find ways to advance in each area without compromising another. Sometimes accepting a tradeoff results from just not thinking hard enough about how to balance all of them, giving up too soon. But I think if you work hard enough and probe deeply enough, there isn’t necessarily a tradeoff. All of the things can be working together.”
Invest in growth
No matter what challenges your business is facing, Sasso says growth should always be part of the criteria for CEOs when making financial or strategic decisions. Continuous improvement needs to be an ongoing investment. When leaders dwell too much on short-term problems and lose focus on continuous improvement, it can have stifling consequences on a company’s profitability and long-term success.
“I think that it’s a mistake to lose your focus and overreact to negative events and retrench,” Sasso says. “You can’t grow by cutting. Notwithstanding that, you do have to achieve operational efficiency. Sometimes controlling or cutting costs is necessary, but you can overreact. We’ve invested during the downturn to position ourselves to come out of it in a strong position. I think it’s important to stay focused on growth and not to panic and to continue to mind the fundamentals of your business.
“If you do nothing you are taking a risk. If you do something you are taking a risk. So you have to kind of get it out of your mind that you can function without taking risks. Then once you understand that, whatever the issue, you look at the options, you gather the facts, you analyze the options and you bring people together who have knowledge and value to contribute to making a decision. You make your best judgment and you move forward. And then you know whatever risks you’ve taken, you’ve taken with good information, with good analysis, with good input.”
As the economy sees signs of recovery, Sasso continues to take risks and invest in opportunities to position Carlton Fields’ for continuous improvement. In his view, even a misstep forward is an advantage over companies who are taking no steps forward at all.
“If you stay focused on the goal on the horizon, once in a while you are going to hit a bump or hit an obstacle, and we sometimes can call it a failure, but it’s just more information,” he says. “It may mean that that particular tactic or strategy is not working at that moment, so you sit back and say, ‘Well, what can we do to get over this bump?’ And the next attempt may even be better and more effective and smarter. So a failure can simply be an opportunity to do something better the next time.
“There’s no such thing as getting to a goal and stopping. I think that’s a mistake. If you are committed to continual growth and continual improvement then you have to keep taking risks to continue to grow.”
Today, Sasso sets his sights on growing Carlton Fields in size and strength, but also in the quality and value it provides clients. By emphasizing continuous improvement in all areas, Sasso keeps complacency in check and his team focused on where the firm can get better, stronger and more efficient. And in today’s business environment, the opportunities are unlimited for companies who set their sights the highest.
“I love the challenge of having to navigate through the economic climate that we’ve been facing,” Sasso says. “I’m excited about the opportunities we face. There’s a temptation to focus on the obstacles being presented by the current economy, but I see so much opportunity for our firm and for this profession. I think we’re really just getting started on what we can achieve as a law firm.”
HOW TO REACH: Carlton Fields, (813) 223-7000 or www.carltonfields.com
The Sasso File
President and CEO
Born: Miami, Fla.
Education: Bachelor’s in economics, Wharton School at the University of Pennsylvania; J.D., University of Pennsylvania Law School — graduating at the head of his class. While in law school, Gary was editor-in-chief of the University of Pennsylvania Law Review. He spent his first year after graduation as a clerk for Judge Spottswood Robinson III on the U.S. Court of Appeals for the District of Columbia Circuit and his second year as a clerk for U.S. Supreme Court Justice Byron White.
Who are the leaders you look to for advice and questions?
I have the opportunity to work with many fine business leaders in the Tampa Bay area, and I often bounce ideas off of my colleagues at the Tampa Bay partnership and United Way. We have a client advisory board, which consists of CEOs and general counsel and we brainstorm with them too.
What do you like most about your job?
What I like most is the time I spend with high-quality people in our community, among our clients and inside our firm.
What is the best business advice you’ve received?
I think it’s probably something that I came across in my first year as a CEO, when I was trying to grapple with the idea of taking risk and what kind of risk and how much risk. I read what I could get my hands on about the job, talked to as many people as I could about the job and one piece of advice that I received is at the end of your first year, if you look back and you haven’t made a number of mistakes, you’re not doing your job well, because you’re not taking enough risks.
They were definitely dropping some “New Coke” references in those first few months. But Patrick Doyle and his leadership team would just smile at each other. No matter what the media pundits said, they knew they were right.
When Domino’s Pizza made the decision to scrap its old pizza recipe in 2009, Doyle’s team had amassed a year and a half’s worth of data that said customers viewed Domino’s as a convenience brand first. They ordered Domino’s for a pizza in 30 minutes, not for quality food. Customers perceived the pizza itself as a brand weakness.
It’s something the leadership at Domino’s never really took to heart. Like its customers, Domino’s leaders had always viewed their specialty as convenience. Any complaints about the food would be offset many times over by the customers who kept coming back for the efficient service. It’s a philosophy that made Domino’s the worldwide gold standard in pizza delivery, with yearly sales in the billions.
That all changed in early 2008.
“We had launched a new ad campaign called ‘You Got 30,’ which kind of took us back to our roots,” says Doyle, the president and CEO of Domino’s Pizza Inc. “While we weren’t guaranteeing anyone a 30-minute delivery, we were reminding them that most of the time, they’ll get their pizza in 30 minutes. The campaign emphasized how Domino’s saves you time and what you could do with that 30 minutes.”
The campaign fell on deaf ears. Consumers had heard it all before.
“They simply did not care,” Doyle says. “The consumers who already used us because they appreciated the convenience already knew what we were telling them. Those that didn’t, who said the convenience factor was great but we needed better food, it didn’t change their minds about anything. So it was right then, in March 2008, about two months after we launched that ad campaign, that we decided we needed to go back to the drawing board with our pizza.”
Take a bold step
To this day, it’s something of a parlor game at Domino’s Ann Arbor headquarters: Who else in the world of business has admitted an inferior flagship product, scrapped it and rebuilt it from scratch?
“We still can’t come up with one,” Doyle says. “The closest example I ever heard was an ad in the late ’60s from Volkswagen, which had a picture of one of their cars, and under the picture it said ‘lemon.’ They were dealing with some quality perceptions head-on, but it was a single print ad from 45 years ago. We have wracked our brains, and our ad agency’s brains, to come up with a comparable example where a company has come out and said, ‘Our product wasn’t good.’ We haven’t yet.”
To make the product better to the eyes and mouths of customers, Doyle and his team had to go directly to the source. The first step was to listen to the people who had an ax to grind with Domino’s. Throughout 2008 and into 2009, Doyle and the rest of the company’s leadership stayed quiet, listened and took their verbal lumps as consumers launched repeated salvos, comparing the crust to cardboard and the sauce to ketchup, among other things.
“We did every possible kind of research,” Doyle says. “We were doing qualitative research like focus groups, where you’re getting people into a room and having them help you get a sense for where the opportunities were. Those were the comments you ended up seeing in the commercials themselves. But then, we also went out and tested every possible ingredient change, every combination of new sauces, crusts and cheeses, until we thought we had it optimized. Then, we took the new pizza ideas to our most loyal customers to see if they’d appreciate the change. We took it to people who weren’t doing business with us. We went to kids, we went to every possible demographic group and kept testing it.”
The rounds of data gathering and testing put Domino’s on the path to wholesale product change. The recipes for the crust and sauce were completely remade, and new cheese would be used.
Doyle and his leadership team had their new product ready for rollout by the fall of 2009. Then came the next step: explaining themselves, first to the company’s 4,900 U.S.-based franchisees, then to public at large.
State your case
The biggest momentum boost for Doyle and his team might have come with a show of hands.
In the weeks leading up to the rollout of the new pizza, the corporate leadership at Domino’s held a series of meetings around the country, meeting with the leaders of all franchise locations.
“We had five meetings over the course of a couple of weeks,” Doyle says. “We showed them the research and talked to them about customer perceptions of the pizza. We had them sample the old product and the new product, and laid out all the implications for them.”
At one point during one of the meetings, Doyle had the franchisees sample the old and new versions, then vote for which pizza they preferred.
“At one point, we did a show of hands,” he says. “It was nearly unanimous. Out of over 1,000 franchisees in the room, there were 12 who preferred the old pizza. It was absolutely overwhelming. We made the case, we allowed them to give us input, but ultimately we had overwhelming support from our system. And that is maybe the most important constituency. Those are the people who pay us to manage the brand. They’re the ones who are relying on us to do the right thing.”
But Domino’s is an industry giant and a public company to boot, meaning the convincing didn’t stop there. When Domino’s made the announcement near the end of 2009, members of the media and pizza-consuming public were quick to whip out references to New Coke, the famous 1985 business blunder in which Coca-Cola reformulated its flagship beverage, resulting in a massive consumer backlash and, ultimately, the reintroduction of the old formula as “Coca-Cola Classic.”
However, Domino’s reasoning for changing their pizza recipe was fundamentally different from the reason Coca-Cola changed its formula a quarter-century ago.
“Interestingly, while New Coke won in blind taste tests, if you went to Coke customers, they’d tell you that the taste of Coke is why they bought the product. It’s what they were used to,” Doyle says. “When they changed the formula, they were messing with what made Coke what it is. What made Domino’s a household name was the fact that we deliver really quickly. We didn’t build our reputation around the taste of the old pizza. So it was a far different level of risk involved with changing something that consumers considered a weakness. At Coke, they were changing something that consumers considered a strength.”
By the time the New Coke questions came raining down, the new pizza recipe had already caused a spike in sales. The company’s first-quarter U.S. sales in 2010 were up 14.3 percent over 2009. Year over year, Domino’s finished 2010 with a 9.9 percent bump in sales.
“It actually made the New Coke questions kind of humorous,” Doyle says. “The fact that sales were up double digits made it very easy for us to say with confidence that we weren’t pulling a New Coke. Whenever we’d get the New Coke question, we’d just kind of smile at each other.”
But before Doyle and his team could chuckle at the New Coke references, there was still a great deal of work to be done. In December 2009, Domino’s had to retrain 4,900 franchises on how to make a pizza. Corporate leadership had to ensure that the old ingredients ran out and new ingredients were stocked as close as possible to the changeover period, which was the week between Christmas and New Year’s Day, when Domino’s rolled out their first ad campaign touting the new pizza.
It was a massive logistical balancing act, and it had to be carried out in the span of several weeks.
“We trained a hundred trainers, they each had 50 stores to cover, and there are typically two to three people in each store who are making the pizzas,” Doyle says. “We’d have the trainers organize the pizza makers into groups of 10 to 15 people per day. Over the span of a couple of weeks, each trainer probably trained about 150 people. You just get the people into a store and go to work. You show them how to do it, and you don’t let them leave until you’re confident they can do it right.”
The scope of the transition didn’t allow for a completely clean break between old and new. There was a period of about a week just before Christmas when a given store could have been selling the old pizza or the new.
Despite the months upon months of research, communication and training, Doyle still had a knot in his stomach as the initial rollout was taking place. Despite overwhelming evidence that the consumers wanted an improved pizza from Domino’s, there was no fallback plan if it failed. Doyle and his staff had to completely commit to the new product, because they were going to finish destroying the reputation of the old product by openly admitting its inadequacy. It was an all-or-nothing proposition.
“I remember one of the meetings with the franchisees,” Doyle says. “One of our greatest franchisees raised his hand and asked a great question: ‘I’m on board with the changes, but what do you do if this doesn’t work?’ All I could do was laugh and say, ‘My successor will have a really hard time dealing with that.’ There was no Plan B. There couldn’t be. On the plus side, when you’re facing something like that, it does tend to help you focus more.”
Domino’s, which generated $6.2 billion in global sales in 2010, also rolled out a similar product change in Mexico. The company’s overseas markets were not altered because they already use different ingredients from those used in North America.
Make meaningful change
Doyle admits that much of what happened is unique to Domino’s, but there are still some lessons about change that are applicable regardless of the nature of your business. Chief among them, you need to make change that has an impact. Otherwise, your customer might not even notice.
Don’t change the label and expect consumers to embrace it as a real, meaningful improvement.
“There are a lot of incremental changes made by companies and trumpeted to consumers as something completely different,” Doyle says. “But consumers tune it out. They know it’s not true. They recognize it for what it is. You have to do things that are material in order to get consumers’ attention.
“You walk up and down the aisle in the supermarket, and there are all kinds of new and improved products, with starbursts and arrows pointing to what is improved. But all they did was change the color of the cap on the jar. And then the company is surprised that consumers don’t get excited about it. You lose credibility as a brand and a company if you so clearly overstate the magnitude of the change. You have to make changes that are real and relevant to consumers, and big enough that they’re going to notice.”
How to reach: Domino’s Pizza Inc., (734) 930-3030 or www.dominos.com
The Doyle file
Name: Patrick Doyle
Title: President and CEO
Company: Domino’s Pizza Inc.
Born: Midland, Mich.
Education: B.A., University of Michigan; MBA, University of Chicago
First job: I was mowing lawns and maintaining some tennis courts when I was 12 or 13 years old. So pretty much as soon as I was tall enough to reach the lawn mower bar.
What is the best business lesson you’ve learned?
The fundamental lesson is that every business is about people, and the companies with the best people are going to win. If you’re recruiting the best and training the best, and getting the best excited about what the company is doing, you’re going to succeed.
What traits or skills are essential for a business leader?
The ability to listen well, the ability to build consensus when you need to build consensus and the strength of your convictions. Once you’ve listened, you go out and lead. That takes a bit of confidence sometimes.
What is your definition of success?
There are a lot of basic ones in terms of creating shareholder value, growing sales and earnings. But personally, what is most gratifying to me is to see the people we’ve brought into this business, whether employees or franchisees, winning and succeeding. It’s about seeing them build great careers and great businesses.
When Millard Choate was an 8-year-old growing up on a cattle farm outside of Nashville, he and his dad built their family’s home. As he continued to grow, the family developed two cattle farms and built barns and facilities, as well. So from an early age, he knew he wanted to be a construction superintendent because of how much he enjoyed seeing things built.
In 1989, that dream was realized when he started his own company, Choate Construction Co. But the economic landscape at that time was challenging, so he had to really dig in to make the company succeed. As the child of Depression-era parents, frugality and positive outlook had been built deep down inside him at a young age as physical buildings were built up tall around him. These characteristics helped him establish his firm and ultimately grow his business despite the tough times.
So when the most recent recession hit, it may have sent shockwaves through many organizations and forced a lot of them to completely revamp their game plan, but Choate simply relied on his upbringing and experience and was able to take it in stride.
“What we have now is reminiscent of when I started the company in ’89,” the president says. “These times are kind of tempering and testing times, and it’s taken us back to our roots to focus on aggressiveness, focus on searching out all types of different projects, focusing on the core values of the company, which includes our procedures.
“Blocking and tackling is a big focus.”
Additionally, he relied on his upbringing and initial experiences founding the company to help him through.
“It’s a tough time,” Choate says. “It’s like people who went through the Great Depression. It can be tough, but it gives people an opportunity to improve, to sharpen both our individual skills and company skills. These times, due to the declining revenues and fees, force us companies to become more efficient. It promotes efficiency and frugality on a company basis as well as on an individual basis — it inspires people to improve themselves and become more and more of an indispensible component of the firm.”
Taking this approach has helped the company weather the storm when revenue dropped from a peak of $738.9 million in 2007 to $358.6 million in 2009.
“[It’s] just thinking and planning and focusing — focus on your core competencies and what you do best and also leveraging those competencies and the types of projects you’ve done,” Choate says. “I believe that’s really the key to it and just keeping the faith. An old coach one time said, ‘When you’re up against a massive team — I was a lineman — just keep your legs moving and keep your legs turning.’ That was true then and in business today. Just keep on plugging and keep on going. Don’t give up.”
That’s exactly what Choate has done. As a result, revenue climbed last year to $429.8 million. The company also has no debt and is focused on the future.
“We feel very confident,” he says. “Our backlog is higher than it’s been in two years, so we see glimmers of improvement, and we see a few more opportunities picking up, and we get a lot because of our reputation. … I feel positive. Reputation is everything, and that’s what keeps us going, so I feel positive in that regard.”
Here are the principles that Choate used to help him not give up.
Meet client needs
Scrounge. It’s often a negative word, but Choate doesn’t see it as such.
“Beat the bushes. No project too large, no project too small,” he says.
In other words, he’ll chase all sorts of projects instead of limiting himself to just a few types, and he’ll do whatever his client needs. It’s a tough market, and the competition is struggling and making things difficult for him.
“What we struggle with as a contractor is we will, at times, have to compete with firms that are really in tough shape that will price warp at a loss just to generate cash flow,” he says. “We can’t do anything about that. We just have to demonstrate that we have the right numbers.”
Not having any debt also helps assure clients that Choate is a good company to do business with.
“There are firms that are really on the ropes and some clients have concerns — will they be around?” Choate says. “Both clients and subcontractors are very nervous because typically the money flows through the general contractors to the subcontractors, and both the subcontractors and the owners are nervous that the contractor could go defunct and the money would have to be paid twice by the owner or the subcontractor doesn’t get paid. That confidence is a key in all parties.”
In addition to establishing the firm as one that can be trusted, he says he also makes sure to respond when customers — or anyone for that matter — calls.
“Anytime they should communicate or call or whatever, instant response is key,” he says. “They can rely on that. Just doing a great job and making sure that they have the confidence that we are protecting their interests at all times; I preach that over and over to our people. Clients trust us to spend millions of their dollars wisely. That’s a trust that we have to maintain.”
To better do that, you have to know what’s important for your customers.
“You have to understand what your client’s hot buttons are, what his interests are,” Choate says. “It’s not just always revenues. Each client has his own nuances so just customize your approach to that client and make sure you’re taking care of them and promote that you’re looking out for their best interest.
“You talk to them. You sit down with them at the inception of the relationship of the project.”
He has an expectations meeting to talk about what they want to see and includes all the key stakeholders — the architect, engineers and anyone else pertinent to the project — and he’s found clients are very positive and forthcoming in those meetings.
“Sit in a room and just go around the table and say, ‘What do you expect out of this job?’” he says. “Then, ‘What are your hot buttons, and what really bothers you in previous projects?’ You’d be amazed what comes out of that — just communicating and actually talking.”
He also says that not every CEO has to personally be involved with that level of intimacy with the client, because it’s just not feasible, especially the larger your organization grows.
“We have different groups here, but the division manager of that group, I expect to have a personal relationship with every client,” he says. “It boils down to that type of relationship.”
Focus on the positive
Years ago, when Choate’s computer would boot up, a short message used to pop up right before the system started — “Get pumped up!”
“Being enthused and going at it tooth and nail is good advice,” he says. “Going at things with a lot of enthusiasm and energy helps dispel gloom and doom anyway.”
He tries to keep employees motivated in the middle of all the negativity they see in the industry. One way he does that is by updating them on how projects are going. He shows photos and announces any new awards, which gets people excited and instills confidence in them. He also expects his managers to be positive, as well. For example, if the Choate Interior Construction group gets a project, the manager of that arm of the business will get on the intercom and just say one thing — “Wahoo!”
“That’s all he says,” Choate says. “Over time, people know what that means. That’s positive.”
He also tries to recognize people’s individual accomplishments, so if someone becomes LEED certified, he recognizes that person. He also recognizes people for accomplishments in their personal lives when he hears about them. For example, one employee received a national award from the Cystic Fibrosis Foundation, so he called that employee out for the accomplishment in front of everyone.
“It’s not only positive, but it’s two birds with one stone — it lets people know their individual efforts are recognized,” he says.
Choate understands that being positive isn’t the natural reaction for many, and he knows that you can’t control everything in business, but the one thing you can control is the way you look at what’s going on.
“Be thankful,” he says. “Realize what blessings you’ve got. Look at your blessings and appreciate the positive side.”
For example, while his volume may be down significantly, he knows that his business is still much larger than it was 10 years ago, so that gives him something to be thankful for in spite of the tough times. By taking a more positive and thankful outlook like this, it sends a positive message to employees so they can stay more upbeat and sets an example for them, as well.
“It’s good to realize that everything you have is a gift from God, and that’s who you really ought to give credit to in the first place,” he says. “That would help set the stage very quickly.”
Look at data
While Choate maintains a positive outlook in life and in business, another key to success through the recession has been not taking a Pollyanna outlook. You have to balance that positivity with being realistic or people won’t think you understand the situation.
“The other thing is being a realist,” Choate says. “I’ve recognized cycles for many years. The curve can’t always be on an upward trend. The growth rate absolutely can’t continue that unsustained climb. It has to, in some cases, decline. It’s a fact of life.”
By degree, Choate is an economist, so looking at data comes naturally to him, but often it’s something leaders tend to neglect.
“I encourage people to analyze the markets,” he says. “What are the coming trends? What are the needs going to be, not just today but six months to a year from now? Try to anticipate where to deploy your resources to produce the maximum return.”
For example, he says that most people recognize that government work and health care are bright spots right now, and condominiums are a more diminished market. Seeing that, he wouldn’t deploy resources to building condos but would focus on those other areas that will be growing and providing opportunities.
Choate saw his volumes increase every year of his business until two years ago, but because of the realistic outlook he had, it didn’t crush him when they declined. It may have been frustrating, yes, but devastating, no.
“It’s almost like the seasons of the year,” he says. “You may wish it was summer all year long, but you just accept the fact that you have fall and winter, but you have faith it will come back next year.”
How to reach: Choate Construction Co., (678) 892-1200 or www.choateco.com
Millard Choate, founder and president, Choate Construction Co.
Education: Vanderbilt — bachelor’s degree in economics and business with a minor in engineering
What was your first job?
I could go way back. I moved a pile of bricks for a neighbor when I was 5 years old. It took about two weeks, and I got 25 cents for that. My first real job was making concrete pottery and birdbaths and benches for a little company in Nashville, and I worked 40 hours a week — hard, hot work — and I made $40 a week. I was rich.
What’d you learn from that job that still applies?
Being frugal. Handing it well. Keeping a job and just doing the best you can possibly do. Be as productive as you can be. The man and woman who owned the store, those people became great references for me. Reputation is everything. That’s what I learned from it.
What’s the best advice you’ve received?
Trust your intuition and your gut-feel. I haven’t always obeyed that but I wish I had. Your gut-feel generally will often tell you or validate your perception of something or some event. Trust your innate gut feel.
What’s your favorite board game and why?
My family plays a game called Pictionary, and the reason I like it is it forces you to laugh at yourself. You can laugh at yourself and each other. Honestly, it’s taught my children to be able to laugh at themselves. Don’t take yourself too seriously.
Steve Russell was feeling some serious pain. Not only had the economy taken a nosedive in the fall of 2008, but it was now January 2009 and he had to contend with a toothache as well as bleak economic news for his company, Celadon Group Inc.
Not one afraid of putting people on the spot, Russell, Celadon’s chairman and CEO, asked his oral surgeon after a shot of Novocain for his advice.
“I said, ‘I believe the true test of someone in life is not that someone can make a good into a better, but somebody who can make a bad into a good,” he says. “This is a bad ? pulling my tooth. What can you tell me you’ve learned in life to make this a good?”
Incredulous at the question, the oral surgeon took up the challenge.
“You know what I’ve learned in life, Steve?” he says. “And I’m not talking about your tooth. So what I’ve learned into life is, ‘Lean into pain; don’t run from it.’”
Russell says that sage advice ? to face the pain ? helped him and his senior managers figure out how to freeze salaries, scrap management bonuses and cut 12 percent of the trucking company’s nondriver personnel.
“We came through the mess better than, if not the best, of any truck company in America,” he notes. “Zero bank debt. Very healthy company.”
This year, Celadon Group is on track to top the $530 million in annual revenue it made last year.
Here’s how Russell keeps Celadon on track to new heights of success.
Keep the employees happy
As an elected official has a constituency to answer to, a company CEO often has more than that.
“There are three constituencies that my principal role is to keep happy,” Russell says. “No. 1 is employees ? if you don’t have happy employees, you don’t have a good company. No. 2 is happy customers ? if you don’t have customers, you can’t pay the employees. No. 3 is happy shareholders. We’re a public company. At the end of the day, those are the three priorities.”
Treat employees as a person, not a number, and they will feel better about the company.
“No other CEO in the top 100 fleets in America talks to new employees when they join, and I do it regularly.”
Such attention will help encourage employees to want to go to work in the morning and want to go home at night.
“If they don’t want to go to work in the morning, they won’t stay ? and you don’t want them to stay,” Russell says.
Happy employees means low turnover. The 4,000-employee Celadon Group turnover rate is about half the usual rate for the industry.
Russell encourages communication by citing mottos and aphorisms that he’s collected all his life.
“One of the best ways to communicate is to make sure employees understand, ‘Don’t get ulcers, give ’em.’”
Not voicing a complaint or grievance can lead to misunderstandings between employees and managers. An open-door policy so the two parties can help iron out issues on the spot can go far in reducing problems.
“Get it off your chest,” Russell says. “Don’t put your head on your pillow at night and say, ‘Why the heck didn’t I say that to Joe, to Bob or whoever?’”
While happy employees is one goal, another is healthy employees. In a company where the average age of a driver is 47 years old, it’s only fitting that steps be taken to make medical attention more accessible.
Russell knew it was inconvenient for a long haul driver to visit a doctor or clinic. So he brought the clinic to them. It’s at company headquarters in Indianapolis ? most drivers pass through the city two or three times a month so it was the logical location.
Not to be overlooked are nutrition concerns. A nutritionist on staff can help employees find the right diet and ways to lose weight if needed.
“We had a driver who’s been with the company four or five years ? he’s lost 180 pounds since he’s started his regimen,” Russell says. “He said his sense of self has gone through the roof, too. It’s a great program.”
Keep the customers happy
To keep customers happy, determine their most critical demand and measure results on how well you deliver on that.
“In regard to customers, if you can’t measure it, don’t do it,” Russell says. “That’s a philosophy I have in life.”
Measure the performance by customer. By being able to show that customer the numbers and statistics, it motivates the company to be accountable for and focused on service. Be sure to communicate to the customer any extenuating circumstances that might have affected the figures. It will help build customer relationships.
Since service is so important in all industries, it pays to be open and honest about matters on how state or federal requirements may limit what can be done.
Don’t overlook the fact that a number of companies are into green programs and are interested in supporting environmental-friendly campaigns. The fact that a company is introducing biofuel and is taking measures to reduce greenhouse gases and air pollution can have an impact in sealing a deal.
“It’s green from the cash flow standpoint and it’s green from the environmental standpoint,” Russell says.
Keep your equipment up-to-date. Impress this fact upon customers, emphasizing that it is thus less likely to break down. Set up an equipment retirement/replacement plan to support this policy. Offer the latest in tracking abilities for your product or service.
“Young equipment is less likely to break down and therefore, service is enhanced,” he says.
Keep the shareholders happy
With regard to shareholders, it’s easy to keep them happy by answering one simple question.
“We’re a public company, so the question is, ‘How is our stock performing versus our peers?’” Russell says.
Comparing company performance with that of its peers is a necessary rule of thumb. Economic challenges appear each day and shareholders will want to know how the company is managing them as compared to others in the industry.
“In other words ? manage; be able to demonstrate to your shareholders whether you’re doing a good job or a bad job,” Russell says. “And the reality is, they’ll measure you completely every quarter, every announcement, etc.”
Keep the balance sheet in the black, and hope that your stock performs better than others because you are doing the right things. That requires going to investor conferences on a regular basis, making presentations and having one-on-ones with investment advisers.
“It’s a matter of communicating with your shareholders so they trust you, believe you and want to own your stock,” Russell says.
Simple good business practices go a long way with cementing a company’s image with shareholders, as well as customers. So as an indication to shareholders that you’re performing well, don’t do business with customers who aren’t responsible for their bill.
“In fiscal 2010, a lot of people took between July and June a whole bunch of write offs, companies, customers going broke and stuff like that ? we did $530 million in revenue, and we had total write offs of $122,000,” Russell says. “Awesome. Truly awesome.”
Russell, who was once president of Hertz Trucks, founded Celadon in 1985 after he ran into a former colleague who needed to solve shipping problems to Mexico. He put up $30,000, leased tractors and trailers, called the company Celadon after hearing it was the prettiest word in the English language and grew the firm to one of the largest in the nation.
Along the road to prosperity, Russell discovered four ingredients of a successful business leader and put them into an acronym.
“L.I.D.S. You’ve got to have all four,” he says.
L is for leader. A good leader is not just someone who runs a company, but someone who will get people to follow him or her. A good leader must also have integrity.
“If you don’t have integrity, nobody will follow you,” he says. “I think integrity is inborn.”
I is for intelligence. A leader must have the intelligence to learn the roles of management, including how to delegate responsibilities. Not only do you endow your people with responsibilities, but measure their performance.
“And if you are intelligent, you can learn anything,” Russell says.
D is for drive, that motivational quotient that pushes you to succeed. It’s a work ethic that makes you want to put in long hours to reach a goal.
“You’ve got to be driven to success,” he says. “My father gave me that work ethic because as a taxi driver, if you’re not working, you don’t make any money. My father would work 14 or 15 hours a day.”
S is for street sense. You learn it from your environment, and you need it to survive.
“The S is the most important of all and it’s not taught anywhere ? Harvard, Yale, Princeton, Cornell,” Russell says.
“Whom do you trust, whom don’t you trust. What’s wrong with something, what’s right with it. What’s negotiable, what isn’t negotiable,” Russell says.
Discontent or dissatisfaction by someone on the management team needs to be dealt with in respect to the larger goals of the company. The person needs to be taken aside and told to focus on improvement ? improvement of the company.
“If they have mother as the objective, and I’m defining mother as the company, that’s who they’ve got to be able to help, that’s who they have to focus on improving,” Russell says.
Post the department performance measurements, the benchmarks, the comparisons over time, on the walls. This helps employees keep those goals in their heads.
On the topic of task priorities, rank them in order, and then stick to it. Don’t get distracted by something that may seem urgent.
“In other words, a person who says this is one of our priorities ? we’ve got to do this, this and this, but then just reacts to e-mails every day and doesn’t work on those priorities, it’s the wrong way to be,” he says.
Delegation is critical if you want to be a leader.
“I feel that you should always delegate as a CEO of a company ? you should delegate virtually everything. Now if your company develops a product and you have 30 people under you, the focus is developing that product. But if you are running a business, you should try to hire people who have LIDS.
“The key in delegation is to surround yourself with people who are as good as or better than you are,” Russell says. “Be secure in yourself to do that. You are only secure if you surround yourself with good people.
“This is what makes a great company because it’s not just the CEO, and I really mean this, it’s the senior management, the middle management. Both have to be very good. Don’t tolerate mediocrity. He or she in management, who tolerates mediocrity under them, is mediocre.”
How to reach: Celadon Group Inc., (800) 235-2366 or www.celadontrucking.com
The Russell file
Born: Brooklyn, N.Y.
Education: Master’s degree, business administration, Cornell University
What’s the best business advice you were ever given?
Don’t get ulcers, give ’em.
Who has been the biggest influence on who you are today?
That’s a tough question to answer. My father gave me a work ethic; my mother gave the realization that all you’ve got in life is time. My brother, a college professor, gave me the importance of getting the best education you can, and my older sister, who sort of acted like a surrogate mother to me after my mother died when I was 6.
What’s your definition of success?
I can’t wait to get to work in the morning; I can’t wait to get home at night. And be happy.
Russell on why he got into business: When I was 12 or 13, I wanted to be an astronomer. When I got into Junior Achievement, we had a little company. We distributed $40 to each person of us. Forty bucks doesn’t sound a lot today but that was in 1955. I decided, “Hey, I’d better go into business because I can’t make any money as an astronomer.” That’s when I decided to go into business.
Russell on having a beard: You know why I have a beard? Because I save five minutes a day by not shaving. I’m saving, say, a half-hour a week, over 52 weeks, that’s 26 hours a year that I’m doing something more productive, plus I’m saving money. My wife trims my beard every two weeks. That’s the definition of a good wife. Basically, that’s why I have a beard because shaving is a waste of time.
Susan C. Kelley doesn’t want her employees to provide great customer service because she told them to do it. She wants them to do it because they feel and believe that it’s the right thing to do.
“In my view, it’s creating a culture where employees want to treat the customer that way,” says Kelley, president of Shell Vacations Hospitality and Shell Vacations Club. Both are part of Shell Vacations LLC, which has more than 1,700 employees.
“The only way you’re going to create that culture is face time with your employees and creating an environment where your company is human,” Kelley says. “There’s no one single thing that a company or a CEO does to create that culture. It happens over time. It happens because management spends time with the employee.”
And it happens when you stand by your word and become someone who your employees can trust.
“If you say you’re going to give a performance review every year, then you have to do it,” Kelley says. “If you say you’re going to create incentive programs for you, you have to do it.”
And if you say you’re going to survey your employees on a regular basis and gather their feedback on how the business is being run, you have to do that too.
“If a hot button issue for an employee, which it always is, is to feel empowered and appreciated, we can create training programs and incentives that are going to help that employee feel empowered and appreciated,” Kelley says. “I’m a huge believer, and it’s been proven in our organization, that that employee turns right around and that’s exactly how they treat the customer.”
Here’s how Kelley uses surveying to stay tuned in with her employees and to help them provide better service to customers.
Set the stage
Shell Vacations was a much different company when Kelley arrived in 1994. For one thing, there wasn’t really a system in place as to how customers were to be treated. It varied depending on which employee was providing the service or at which resort it was being provided.
Kelley wanted to change that. So she launched an effort to gather feedback from both employees and customers as to what they expected from the company.
“If you can gather the priorities of your employees and your customers, then it becomes a function of culling through that information and saying, ‘OK, what kind of training do we need to provide to our employees to reinforce what’s important to that employee, but mesh it with what the hot button is for the customer?’”
Surveys obviously can be an effective way to gather this kind of information. But before you take that step, you need to go talk to your people face to face.
“It doesn’t help any company or any CEO to just send out the survey and say, ‘Here, take the survey.’ Then it has zero credibility,” Kelley says. “Particularly if you’re trying to create a culture where this becomes a way of life on a long-term basis and not just the one time. In order to do that, you have to go out and talk to your employees and tell them what you’re doing and why you’re doing it.”
In some cases, the face-to-face conversations may be enough to gather the feedback that you need.
“If I was a CEO of a company that had 100 or fewer employees, frankly, I too perhaps would question how critical [a survey] was, knowing I could spend time with 100 people in my organization in any given month, quarter or half year,” Kelley says. “But when you have hundreds of employees or over 1,000 in our case, the ability to find out what they are thinking and feeling is absolutely essential to the success of your organization.”
In Kelley’s case, a survey was needed as she was trying to build something that would have a lasting impact on the company. So she explained to people exactly how the survey process would work before it was to be carried out.
“We tell employees, ‘OK, you’re going to take the survey on Oct. 2’ or whatever the date may be,” Kelley says. “We will have the results by Nov. 5 and by no later than Nov. 10, we’ll be scheduling departmental meetings to go through the results of the survey.”
You also need to work with your direct reports to make sure they are clear about the schedule and to make sure that they understand how critical it is that everything happen according to the plan.
“My direct reports provide me with a very detailed timeline of exactly the schedule for the survey,” Kelley says. “When is it being rolled out? When are we expecting the results? Here’s what we’re going to do when we get the results. Here’s the action plan of how we’re going to follow up on those results. So we actually train management on what the proper process is for following up on the action plan.”
It’s these details and your commitment to them that can make a difference in how seriously your employees take your survey process.
“One of the biggest mistakes that companies make is making promises and then either not following through or being very late in following through on those promises,” Kelley says. “I always tell the management team that reports directly to me, it’s like spanking a puppy for having an accident on the carpet. If you don’t catch it right away, it no longer has any meaning.”
Trust the experts
Your best bet for conducting an effective survey of either your employees or your customers is to find a third-party company that does it for a living.
“We look for a company that has done surveys in our industry,” Kelley says. “We look for a company who is willing to sit down with us and understand our company’s culture, our company’s mission and service statement and our service goals. A company that every time we do a survey, and we’ve been doing our surveys now for almost 12 years, it’s willing to go through the results of those surveys with us before they get rolled out to the employees.”
The best thing is to find a company that you can stick with on a long-term basis as it’ll be able to track changes and trends that you are going to want to know about as more surveys are conducted.
“They can look at trends and compare information from the prior survey and provide us with analytics from having so much experience,” Kelley says. “They may say to us, ‘Sue, all of a sudden your results in ‘I feel appreciated’ have jumped 10 points across your company. Have you done something different in your organization in the last six months that would have caused the results of that question to jump by 10 points? It’s hugely beneficial for us because we can take a look at how what we’ve done has had a positive or negative impact on the survey. They are our partners.”
So with that long-term view in mind, provide a sense of what you’re looking to accomplish with your surveying. A good survey company will work with you, although they may not always agree with you.
That’s when you need to keep in mind, this is what they do for a living.
“They initially provide us with stock questions,” Kelley says. “We sat with them and said, ‘Fifty percent of these questions work for us, and 50 percent we’d like to tweak.’ They said, ‘Your tweaks don’t work.’ There are scientific reasons why and that’s why they write surveys and we don’t. But they said, ‘We understand where you’re trying to go with your tweaks, so let’s alter the question and see if it works for you.’ So they provide us with the stock questions, but for that 50 percent we wanted to tweak, they helped us customize them for our particular organization.”
If a company is not willing to work with you, it’s probably not going to provide the benefit you’re looking for. So you want to find someone you feel comfortable with and someone who you feel is after the same goal that you are.
“They are our partners,” Kelley says.
Make it matter
Surveys of customers are very similar to employee surveys in that you’re typically after the same goal: to get good feedback that you can use to make your organization better. The difference is that customers come and go all the time and it can take some effort to reach them depending on what your business does.
Shell Vacations uses electronic surveys with customers that include drop-down menus that ask for more feedback if someone had a negative experience in a particular area. But perhaps more importantly, the cover letter on the survey is signed by Kelley.
Customers are also reminded when they check in and when they check out that the surveys are of great value to the company.
The idea of surveying is one that should be valuable to any business, whether that company in the hospitality business, the manufacturing sector or any other type of industry.
“Every business in this day and age is competitive if for no other reason than with the Internet,” Kelley says. “You can buy anything and everything by going to Google and typing one word and finding 1,000 different organizations that provide the same product. In our world, as fast as it’s moving, understanding your customers’ needs and your employees is translatable to any type of business or organization.”
You need to show yourself to be someone who is tuned in to what’s happening in your business and responsive to the needs of both your employees and your customers. You need to show people that you care.
“In the bigger picture, this is not just relating to surveying,” Kelley says. “It’s very important for management, if there is a glitch, if there is a concern, if a particular division of the company or particular area of the company begins to slip or has a trend that’s going in the wrong direction, you can’t get mad about it. You have to look at it objectively and create an action plan to try to fix it. You have to be patient. Take a deep breath and count to 10. Don’t immediately assume that somebody is doing something wrong.”
How to reach: Shell Vacations LLC, (847) 564-4600 or www.shellvacationsclub.com
The Kelley File
Kelley on her big career break: “In between graduating from high school and going to college, I needed to have a job. I had a scholarship to go to college but there were ancillary expenses. So I needed to have a job. I went to downtown Chicago looking for a job and walked into the Congress Hotel on Michigan Avenue having absolutely no clue what people did that worked in hotels.
“I was very fortunate that I was hired for the summer. I worked there the entire summer between high school and college and I absolutely loved it.”
But the college thing didn’t really work out.
“I went to college in the fall and absolutely hated it. There was not a moment in time that I was in college the first semester that I didn’t wish I was back at the hotel working.”
So after being offered a full-time job with the hotel, back she went.
“For me, it was like somebody handed me a check for a million dollars. … I never went back to college, and I have worked in the hospitality industry ever since.”
What is the best advice anyone ever gave you?
This was from Jerry Sikes, front office manager at the Congress Hotel. He had tremendous patience in this young girl who had stars in her eyes, but also willingly, openly and without a moment of hesitation taught me everything that he knew. He said, ‘Just try to figure it out and if you make a mistake, pick yourself back up and figure out another way to get it done until you get it right.’
Since he joined First Watch Restaurants Inc. more than 20 years ago, Ken Pendery has grown the company to 83 locations across 12 states. Though he’s significantly expanded the footprint of the breakfast-focused restaurant concept, he is less concerned with his own tracks than he is of the customers going in and out of his restaurants.
“I think the biggest challenge of the last couple years has just been traffic,” says Pendery, who is the president and CEO of the Bradenton, Fla.-based company. “I felt that working with the challenges of what we now look back on as the bubble — where there were just a lot of restaurants opening and we were competing for traffic — it was just more and more competition.”
Yet even with the added challenge of a turbulent economy, Pendery has avoided making any major changes at his restaurants. He reinforces customer loyalty by doing what he’s always done — keep First Watch employees focused on providing consistent, quality customer service.
“We’ve really just wanted to maintain value and service and make sure we give the same experience, if not better, than people have grown to expect,” Pendery says.
“We have not changed our recipes. We have not cut back on food, meaning we have tried to continue to deliver the excellent service that we’re known for at the same price without cutting anything. We’ve been very adamant that we’re not going to take something away, that we’re going to make sure that people find us of the same or greater value.”
The result of this service-focused philosophy is tried and true. Today, First Watch is the largest, privately owned, daytime-only restaurant nationwide with more locations being added every year.
Here’s how Pendery leads his team of 2,000 employees to deliver top service for First Watch customers across the country.
Communicate your values
To ensure execution across national locations, a CEO needs capable managers who can motivate service excellence and handle customer issues successfully at the local level. Though Pendery splits his time between the corporate office and First Watch restaurants, his visits to different locations aren’t about micromanaging employees. He sees them as an opportunity to keep the company’s service mission and values front of mind through clear and regular communication.
“They are there every day,” he says. “Just because I get to every restaurant two or three times a year on average … really is fairly meaningless. But I think for them to see and know that I travel that much is meaningful to the fact that we do what we say we’re going to do and let’s keep the focus on our service.
“We have monthly service meetings and we talk about our five steps of service and we talk about our ten commandments. We constantly talk about it. We don’t just post it on the wall and say, ‘Yeah, we believe in this.’ We talk about the speed of our service and the friendliness of our service constantly.”
Providing opportunities for employees and management to routinely communicate creates a natural pipeline for identifying and delegating customer issues more effectively.
“We communicate a lot, and I think communication brings focus and that focus brings the commitment to our speed of service and the quality of our food,” Pendery says.
“There could be a break down in food. There could be a snowstorm coming. There could be a customer comment about reservations or no reservations. Whatever it may be, that’s talked about at a weekly meeting, a monthly meeting, a server meeting and theoretically all that gets pushed uphill so that we have conversations about it.”
If you develop strong organization wide communication, information flows more efficiently from managers to team members but also from team members to management. Ultimately, you and your managers will have a more accurate picture of the customer experience and how it can be improved at the national and local levels.
“[I] love to have servers who give me feedback on what does or does not work,” Pendery says. “I keep extensive notes, and I’m always referring back to that. We just had our regional vice president meeting last week and I brought out two years worth of notes, things that we’ve covered in the last year, highlights, things that we’ve done and reacted to well or things that we forgot about or things that, ‘Well, we didn’t push this one very far.’ But again, it’s all meant to be a strong collaborative nature.
Creating a great customer experience comes down to more than having a great product or service. It’s about delivering that great product or service on a consistent basis. Pendery recognizes that First Watch’s customer loyalty doesn’t come from meeting people’s expectations one time or even most times, but every time.
“The reason we have our degree of success is that people have grown to count on us for our level of quality food and our level of service,” Pendery says. “I always tell people in presentations, that’s why we go back to the dry cleaner in our neighborhood or the place that works on our car. We go back to places that we can count on, for whatever service we have, and I think they go back to restaurants or they go back to First Watch — they being our customer — because they have grown to count on us for our performance.”
But no matter how many good experiences customers have with your business, one bad experience can change their whole perception of whether or not they can count on you. Day to day, there are always things that can wrong, so it’s up to the CEO to keep people committed to doing the right things.
“You always have a staff member that breaks down,” Pendery says. “There are human errors that happen and people have a bad day or something like that. I’m not suggesting for a moment that our staff of people is perfect or that we don’t have a fundamental flaw that can happen. But I will argue, and I would support, that day in and day out we execute very, very well. I think that my style is to compliment that execution and to encourage a collaborative nature in our challenges and feedback and things that come our way that we have to pay attention to.”
Even though Pendery wants to please the majority of customers, he’s also careful about pursuing trends that could compromise First Watch’s service promise. When it comes to how people like their food, customer feedback is obviously mixed.
“We’re 27 years old,” Pendery says. “So people will tell us don’t change a thing, because they don’t want to see something change, and on the other hand, people will say the trend is turkey bacon or something like that. But that can be a little bit misleading.
“It all sounds and reads really well, but how much can you enact or do tomorrow morning? Is the trend short term or long term, and is it really meaningful? Years ago you might remember that everybody just jumped on the Atkins diet. Everybody wanted to put it on the menu, and six months later, it comes off the menu.”
That’s why it’s important to make sure the consumer’s perceived interest is real before fully committing resources to a new product or trend. To find out if a new menu item has the potential for long-term success, Pendery first puts it on the First Watch specials menu to see how customers respond.
“We run it through our specials category and if it’s successful, we’ll do it more as a special, and if it’s really successful we run it onto our menu because it’s so popular,” he says. “We’ve always done it that way and we continue to do it that way.”
If you begin facing ongoing challenges related to consistency, it may be because you’re pursuing an idea or strategy that doesn’t fit with who you are as a business. When something isn’t working, you need to re-examine whether it aligns your company’s core values and mission.
“We just have to understand what we’re in business to do,” Pendery says. “There are just some things that First Watch — we probably can’t do. Not that we haven’t talked about it for a gazillion years, but we don’t do espresso for instance. … We don’t think we can execute espresso. It takes too much time and probably drives the average check too high, as an example. So we can’t be everything to all people.”
Know your customer
While Pendery won’t change his philosophy on service, he understands the value of being flexible to give his customers what they want. He knows that when it comes to breakfast, people can be more specific about what they like and don’t like. That’s why at First Watch customers are encouraged to customize their orders any way they can. More than half of the orders from diners have some variation from the original menu item, whether it’s adding cheese or skimping on the bacon.
“Very simply I think we reinforce well: ‘If we can, we will,’” Pendery says. “When a customer says, ‘Can I?’ Almost when those words come out of their mouth — if we have it, we’ll do it. And I think the service staff and the kitchen is well trained and communicates well with the consumer. If they want it and we have the ability to do it, then it’s simply done. That’s how it happens.
“I think that proves the point that people like to have it their way, and we do that well. We fit into the marketplace well and we’re considered local, because we execute that special request to their liking.”
By staying attuned to who you are and who you aren’t as a company, you’ll be able to highlight your areas of strength and eliminate your weaknesses. Pendery says it’s not about following the trend but examining the trend and educating yourself on what it means for your business.
“Luckily, we have a tendency to look at things and not react too quickly,” he says. “Maybe that’s part of our weakness that we don’t react too quickly, or maybe it’s part of our strength.
“I stand pretty tough on the methods by which we’ve been successful: our 10 commandments, our five steps of service, the speed of our food, the quality of our food, the cleanliness of our restaurants. This is not space science here. This is service.”
By establishing First Watch’s reputation for consistent, quality, customer-focused service, Pendery keeps loyal customers coming back while adding new ones every day. In 2011, he hopes to reach the milestone of opening First Watch’s 100th restaurant.
“I think the best advice is always set is stay true to your core values and stay true to your mission,” Pendery says. “I work really hard to run a business with integrity. I work really hard to live up to the promises we make to our employees, our management, our leadership and our customers.
“At the end of the day there are a lot of great restaurants serving omelets and pancakes and salads and sandwiches and chimichangas, specialty items like we have. There’s a lot of a restaurants that do that and do it well, but I think the reason we are successful with it and the reason we do it well is because A, we’re very consistent or we work very hard to be very consistent, and you earn a reputation on that consistency. You earn a reputation on the speed of service, the friendliness of service and the quality of your food on the most consistent basis. That’s what people come back for because they can count on you.”
How to reach: First Watch Restaurants Inc., (941) 907-9800 or www.firstwatch.com
The Pendery File
President and CEO
First Watch Restaurants Inc.
Hometown: Cincinnati, Ohio
Education: B.A. from Indiana University
Favorite First Watch menu item: eggs benedict
On problem-solving: I think the biggest thing that a lot of times companies do, and we certainly have done it from time to time as well, is we try to fix things with a fix rather than go back to the base or the fundamental or the foundation of the decision. It’s fix things with a Band-Aid whether than go back and really understand where the true root of the challenge is, and in the restaurant business, I always feel that the root of the challenge is always back to the base, which is the food, what you manufacturer. If we are having problems with pancakes or we’re having problems with eggs or we’re having problems with bacon, go back to the root of the cooking. Go back to the root of the product. Find what the challenge may be and then understand it from that. Don’t just make a switch or put a patch on something, but really understand the base of the problem.