Much attention has been given to the fees and expenses of qualified retirement plans. Many questions are being asked about the reasonableness and quality of the current 401(k) landscape.
For decades, service providers have been charging excessive, and often hidden, fees to a countless number of plan participants. Similarly, plan investment options came under fire shortly after the 2008 financial crisis, which saw millions of workers lose significant portions of their retirement savings. This unfortunate combination — excessive fees and poor returns — was the driving force behind the recent regulatory changes.
Smart Business spoke with Eric N. Wulff and Christopher D. Bart, managing directors and principals at Aurum Wealth Management Group, about the Department of Labor’s (DOL) plan to address these issues.
What are some of the company’s fiduciary responsibilities relating to their retirement plan?
The three main concerns revolve around fees, service and investments.
On Feb. 3, 2012, the DOL issued a final regulation under the Employee Retirement Income Security Act of 1974 (ERISA). This regulation requires a 401(k) plan’s service providers to disclose all fee and compensation arrangements, effectively known as ‘full fee disclosure.’
From a service perspective, companies are required by the DOL to determine the reasonableness of fees. Industry best practices indicate the most effective means by which you can evaluate the reasonableness is to place the plan out to bid. Conducting a request for proposal process allows you to compare not only the cost and compensation arrangements, but also the nature and level of the service. If the service provider does not provide a level of service commensurate to its fee, it is the company’s fiduciary duty to terminate the provider.
As for investments, companies are required to maintain a documented process on the selection and monitoring of the investments in the 401(k) plan. Specifically, the DOL recently put out an advisory bulletin on target date funds requiring them to evaluate the absolute risk of these types of investments. Target date funds became a popular investment strategy because plan sponsors were given fiduciary relief if they offered them as a qualified default investment alternative. This turned out to be somewhat problematic when the market crashed in 2008 and 401(k) participants saw their investments drop by 20 percent or more.
How can companies minimize their fiduciary responsibility?
There are different types of advisers companies can engage to assist them with their responsibilities, and companies can do a better job understanding those options.
The two most common levels of fiduciary status under ERISA are 3(21) and 3(38). As a 3(21) fiduciary, the adviser serves as a co-fiduciary to the plan; in this role, the adviser monitors plan investments and makes investment recommendations to the plan sponsor, but does not have discretionary control of plan assets. As a 3(38) fiduciary, the adviser takes control of plan assets, makes all investment decisions and insulates the plan sponsor from fiduciary liability as it relates to plan investments. Hiring a 3(38) fiduciary is the highest level of fiduciary protection under ERISA.
Where do participants stand in all of this?
With most retirement plans, a big problem is that participants are not allocating assets correctly. So, many 401(k) plans are starting to implement more help features for participants. Studies show the average participant can earn an additional 2 or 3 percent per year by getting professional help. Unfortunately, the average participant tends to chase performance when determining their investment allocation.
Hopefully, these increased responsibilities on plan sponsors will continue to bring much needed change to help fix the nation’s structural problem with retirement savings.
Aurum Wealth Management Group is an affiliate of Skoda Minotti.
Eric N. Wulff is a managing director and principal at Aurum Wealth Management Group. Reach him at (440) 605-1900 or firstname.lastname@example.org.
Christopher D. Bart is a managing director and principal at Aurum Wealth Management Group. Reach him at (440) 605-1900 or email@example.com.
Insights Accounting & Consulting is brought to you by Skoda Minotti
Most business leaders want to greatly improve customer loyalty, and I am no different.
To drive loyalty to my promotional products business, we have tried all the usual means — low prices, free shipping, membership club benefits, discounts and exclusive product offers.
Once, we even tried sending a vase of fresh flowers after each order. None of these initiatives resulted in the dramatic improvement that we sought. Over the years, we have engaged a series of expert consultants to find even more ideas to try. But in our business, customer loyalty remains a tough nut to crack.
The pharmaceutical giant Eli Lilly & Co. struggled with similar obstacles when it came to problem-solving in their business. Many were scientific, and — even though Eli Lilly’s substantial R&D group is staffed with talented technical experts — some problems resisted a solution for years. However, the company did invent a way to solve some of its problems quickly and cheaply.
Use expert advice — of others
Here is the gist of it: Eli Lilly discovered that it could solve a lot of the most intractable problems by giving them to experts from other fields. Simple? Yes. Counterintuitive? Yes. The surprise is that it seems to work.
The company put together an online network of thousands of scientists from other disciplines and “broadcast” their brain-stumping challenges to these experts from other fields. In many cases, the experts solved the problems by simply drawing on knowledge common in their own areas and applying it to Eli Lilly’s dilemma.
Eli Lilly’s scientists, we may presume, know just about all there is to know in their respective fields of expertise. Likewise, in my company, our experts know just about all there is to know about the industry, our products, our customers, competitors and so on. When the subject-matter experts can’t solve a problem, you need to cast a much wider net. If the specialists are stumped, then a solution, if found at all, will come from people outside the field.
Modify your individual process, if needed
Today, our company is using a version of Eli Lilly’s method in our business, which other organizations might also use to address their toughest problems. I didn’t have the time or means to put together a large team of experts from outside disciplines to work on my company’s challenges. So we use a modified Eli Lilly approach: We deliberately, routinely expose our in-house experts to nontraditional experiences and knowledge.
The idea is to see whether we can find our own answers by investing to acquire experiences outside those we normally encounter. In recent months, this new approach has involved my participation in a variety of eye-opening situations, including a meeting with the Cavalia producers, lots of museum visits, a guided tour of London graffiti and a design school workshop at Stanford University. On a personal level, I’m trying much harder to add new concepts and idea possibilities to my thinking.
I don’t know whether we’ll crack the customer loyalty problem in this way, but I can tell you that the ideas we discuss now are fresher than those we used to generate. That’s why my prescription for increasing the likelihood of solving the toughest problems is this: Live outside the box.
Jerry McLaughlin is CEO of Branders.com, the world’s largest and lowest-priced online promotional products company. McLaughlin can be reached at JerryMcLaughlin@branders.com.
When my great grandparents immigrated toAmericafromItalyin the late 19th century, they sought to assimilate. Like many newcomers, their goal was to work hard and blend in with their American neighbors.
A lot has changed since then. We’re a far more diverse nation than we were 100 years ago and technology has made the world a much smaller place. Success still requires hard work, but it no longer hinges on blending in. In fact, the opposite is largely true: In order to compete and thrive, individuals increasingly need to identify and magnify what it is that makes them different.
The same holds true for organizations: They must stake a claim to what separates them from the rest and create environments where employees’ diversity is an asset and an advantage.
It’s obvious to me that this is the wave of the future. Yet, I still encounter a surprising amount of resistance to embracing differences on a personal level. Many work environments continue to be characterized by an atmosphere of conformity. I can only assume that this is because people find differences to be threatening and uncomfortable. In this setting, employees are stifled rather than encouraged when they think or behave differently from the norm.
Working exclusively alongside people who share similar skill sets and worldviews is like trying to comprise a winning football team with 11 quarterbacks: You’ll be great at passing, but the rest of your game will be lacking. Or like trying to win a game with only two plays: It doesn’t matter how brilliant those plays are, you need greater versatility.
Today’s pioneering businesses know that thriving in a complex, ever-changing market requires being nimble and well-rounded. They know they must respond quickly and creatively to challenges and barriers. They do that by leveraging their “originality factor” — getting the most from the distinct skills and talents of each member of their workforce.
How do you maximize the benefit of your employees’ different skills, talents and views? By fostering a work environment that supports limitless, non-conformist thinking. The way work is produced dramatically influences what work is produced. You can’t separate process from outcomes. Here are a few proven ideas:
Cross-train. We can deepen our strengths when we actively seek to develop new, boundary-spanning skills and knowledge, like athletes who work their muscles through a variety of exercise routines. In the process we make ourselves more well-rounded and bring greater value to our businesses.
Limitless idea-making. Provide employees with an innovation room — a dedicated physical space where free-thinking is not only encouraged but expected. The space should inspire creativity. Its design is hemmed in only by your imagination. Think large work tables or no tables at all, pedestals, chairs in uncommon configurations, writing tablets, colorful pens or even crayons.
This space shouldn’t be reserved for special-occasions, but accessible at all times with the understanding that it’s for generating innovative and creative ideas.
Boost morale. A strong sense of team membership fosters feelings of inclusion. Once each team member believes that they are a valued member of the team, they’ll feel much more comfortable to offer creative solutions to problems.
Promote teambuilding through an emphasis on open and honest communication; encourage broad input during meetings, making sure that the stage isn’t monopolized by a few; publicly applaud team successes; and create opportunities for team members to develop relationships.
Push your boundaries. Most people have strong notions of what they are and are not good at doing. They tend to play to their strengths and quickly dismiss the time and energy required to learn a new skill, cutting off opportunities for growth. Push yourself and others to go beyond current strengths by experimenting with new and different skills and behaviors.
Businesses and people that embrace differences and actively experiment with them will overcome barriers and gridlock in an accelerated way and reach their targets more rapidly. Those who resist will be left behind.
As a leader, what are you doing to create an environment where differences are encouraged and valued? You can start by modeling what you value and desire: If you’re not afraid to be an individual and go against the grain, it frees others to do the same. Leaders who demonstrate a willingness to be different and set themselves apart will prompt others to follow suit.
But it doesn’t stop there. The work environment has to be one where different skills and strengths are valued equally.
Are you making the most of your originality factor?
Donna Rae Smith is a guest blogger for Smart Business. She is the founder and CEO of Bright Side Inc., a transformational change catalyst company that has partnered with more than 250 of the world’s most influential companies. For more information, visit www.bright-side.com or contact Donna Rae Smith at firstname.lastname@example.org.
Peanut butter and jelly. Nuts and bolts. Lennon and McCartney. Love and marriage. What do all these things have in common? They represent great partnerships — things that go together, like, well, a hamburger and fries (when I’m not on a diet, of course).
Great partnerships epitomize the concept of the whole being greater than the sum of the parts. Vanilla ice cream is great, right? And who doesn’t love an ice cold glass of root beer? But put the two together and you’ve created an American classic: the root beer float.
Business can be like this, as well. Your company may be doing fine, but perhaps it can do even better with the help of a well-chosen partner.
After many years of being an independent businessman, I’ve followed my own advice and taken on a partner for the first time ever.
I’ve always felt that to be successful, I had to genuinely believe in my products, so it’s safe to say that my high hits-to-misses ratio was precisely because I considered them all to be labors of love. The Gazelle, Body-by-Bison, Cheeks footwear — they’re like my children in many respects. Still, there are limitations to what one individual can do.
Look to expand
I’ve wanted to expand the reach of my products for quite some time, and the financial resources that a new partner brings are certainly a critical component to achieving this goal. However, the scope of the endeavor also means the partner that I choose must be able to provide more than just cash; they must understand the business I’m in, backward and forward.
Look at what a partner can bring to the table to supplement your strengths. If I approach things intelligently, I can work with my partner to get the right buyers with negotiation skills so we can source products at the best possible prices in order to make a decent profit.
Of course, having a partner who is also willing to put the money up to buy the products is also key because of the importance of having an equity stake in what you sell beyond just collecting royalties.
What makes someone a good partner may vary depending on the business that you’re in, but it’s critical to understand that a true partner contributes more than just money to the venture.
Decide if a partner is a good fit
At the end of the day, the decision to take on a partner will hinge largely on what you determine to be your ultimate goal for your business.
For me, at this stage of my life, it’s about expanding the availability of my products internationally and to broaden my retail distribution channels. Some of it is driven by my desire to be the best I can be — but it’s also fair to say that I’m looking at monetizing the value of my trademarks, copyrights and patents so that there’s a tangible value to the company that can be sold someday.
The thought of giving up 100 percent ownership and control of your business to have a lesser share might be difficult at first. I admit it, I like calling the shots. But I also know that I can’t do everything at that level. The key is to focus on the big picture and try not to let your emotions get in the way of success.
Don’t let anyone tell you differently — nobody wants to run a company forever. And if you can build your company up to the point where it’s functioning well and is highly desirable, there’s a great deal of satisfaction in that, not to mention a nice pay day, when you can relax and enjoy the fruits of your labor — especially if they’ve been labors of love.
Tony Little is the president, CEO and founder of Health International Corp., and executive chairman of Positive Lifestyle International. Known as “America’s Personal Trainer,” he has been a television icon for more than 20 years. After overcoming a car accident that nearly took his life, Little learned how to turn adversity into victory. Known for his wild enthusiasm, Little is responsible for revolutionizing direct-response marketing and television home shopping. He has sold more than $3 billion in products bearing his name. Reach him at email@example.com.
Krish Ramakrishnan isn’t a clairvoyant. He can’t actually predict the future. Yet as a serial entrepreneur, Ramakrishnan repeatedly succeeds at a feat that eludes some of the largest and well-funded businesses in the world: coming up with business ideas that transform industries.
Ramakrishnan’s most recent company, for example, provides a service that makes videoconferencing interoperable for businesses. So if you’re a Skype user, you can call somebody on Google or Cisco, and so on.
“It’s all about universal connectivity,” says Ramakrishnan, co-founder and CEO of Blue Jeans Network Inc. “If you have an iPhone and you’re only able to call other people on the iPhone, that’s not much use. And that’s what the state of videoconferencing was prior to Blue Jeans.
“All these business models said they wanted people to be attracted to their island without ever having the opportunity to be voted off the island. We made everybody get off the island.”
Seeing islands where others see market share is one of the ways Ramakrishnan creates such in-demand businesses. His previous start-up, Topspin Communications, was acquired by Cisco for $250 million in 2005. Cisco also acquired his first company, Internet Junction.
With nearly $50 million in venture funding, 100 employees and an impressive customer list —including Facebook, Groupon and Foursquare — Blue Jeans is now also on the fast track for growth.
But if Ramakrishnan isn’t a psychic, how has he been right so many times? The answer is, by looking at the obvious. One of chief reasons Blue Jeans is successful is the fact that the concept is actually, quite simple — so simple actually, that when it came out, many companies couldn’t believe there wasn’t already a business like it in the marketplace. So the question then becomes, ‘Why didn’t anyone else see it? And if they didn’t, why did he?’
Smart Business spoke with Ramakrishnan about how he identifies and pursues innovative business opportunities and why you don’t need to be an industry leader to transform an industry.
Q: How did you identify the market opportunity for Blue Jeans?
KR: I always look for trend lines in technology rather than headlines in technology. The headlines in technology are cloud computing, all of those things. But if you start a company based on the headlines, you’re shooting behind because everything is already designed. What you want to do is look at where all of these technology trends are going, and at the conversion of a couple of these trends, there might be an opportunity, a pain point, two or three years down the road that you need to solve for a customer.
Three years ago, video was in the headlines all the time because HDTV had come in. So I looked at one trend line as video was getting huge adoption. The second trend line I looked at was homes are getting broadband adoption, and in a big way. And independent of this, I was looking at demographics. There were lots of young people coming into the workforce.
So when you think about these things and say: If these trend lines intersect — they are not currently connected in any way — you’ve got the young workforce, broadband adoption and high-definition TV. If they intersect, what kinds of things could you design in the marketplace that could take advantage of these trend lines?
And I said, ‘Younger people are used to being on video. They probably want to use videoconferencing. If there’s more broadband available, they can do video from their home. And they want to be able to experience HD.’
Q: So you tapped into the idea of videoconferencing. But how did you approach it differently than companies already in the market?
KR: Videoconferencing is not used well in the workforce today, even though it’s been around. It’s very hard to use. And I said, ‘How can we make it pervasive?’ That was the question based on the trend lines. But that in and of itself doesn’t give you an opportunity. That just gives you a target to shoot at.
Then you have to figure out OK, videoconferencing. What are we going to do that’s something unique? When we looked at why everybody isn’t using videoconferencing, we found out people aren’t using it because it lacked ease of use, it lacked interoperability, and it was expensive. We said, ‘If we can solve these three things, we would have a big hit in our hands.’ And therein lies the hard work. … You can’t really solve one, because it may not be a big deal. It may be a ‘me too’ product. You need to solve all three issues to transform the industry.
Q: Once you solved those problems, how did you know your service would resonate with the marketplace?
KR: You need to get your potential customers to give you some help. It also helps — and this is true of Blue Jeans — to think like an outsider. The reason we’re successful, and this is something unique, is that we have no experience in videoconferencing.
In fact, that is the hallmark of our success. Intentionally, we did not hire anybody from the videoconferencing space at first. The first 10 employees were not from that space because we wanted to bring an outsider’s perspective.
What actually surprised us was the number one question that people asked us is, ‘What took you so long?’ And the flip side of the question was, ‘What you guys are doing is so obvious; why hasn’t anybody else done this?’ This directly relates to another one of our favorite axioms we use in our company. Einstein said you cannot solve problems with the same thinking that created it. The videoconferencing industry always saw the problem one way. That thinking is not going to help them break out of it.
So lesson No. 2 for me — and this is a piece of advice I give everybody — is don’t be afraid to go into new industries where you don’t have the actual expertise in the industry. If you have the drive and knowledge, you can get the expertise at the relevant time. But as an outsider, you actually bring a lot to the table to solving an industry’s problem.
Q: What are the keys to succeeding as an industry outsider?
KR: You need to understand from a business perspective what some of the pitfalls are in that industry. For instance, in the videoconferencing space, most of the buying was done by IT departments. Most of the scheduling and the conferencing were done by IT departments. So you need to understand how the dynamic of that particular industry works in order to design something that can be used by everybody. You need to talk to enough people, and of course, talk to industry incumbents and get their thoughts — not necessarily their advice. When you talk to them, they’re going to validate your thought process.
Q: How has your previous business experience helped you to grow Blue Jeans?
KR: When you start a company, you are a nobody, and you have to evolve into a somebody by building credibility. So the first rule of thumb is in order to build that larger-than-life image of yourself, of your company; you have to associate with successful people that are backing you.
This could be your advisory board. It could be other entrepreneurs that have been successful — so that when people come to your website and say, ‘Oh, Blue Jeans. Who is that?’ they look at the people who are backing you and the advisers who are advising you. Then they get that perception that this company must be doing something very interesting. … That goes a long way in building an image of the company.
The second half that’s always helped me is the fact that you only know about half of the problem. You don’t know exactly whether once you finish this product whether it’s going to take off in the market.
You need to have a very flexible attitude, even in the implementation in terms of the technology and architecture, so that you can change as you develop the product. You should be willing to change based on your business plan, your product idea, the final product and how you go to market.
The third thing is to be able to make decisions with imperfect data. If you wait for all the data to make a decision, your decision will be stale, and it will be too late. You need to be comfortable making decisions with imperfect data, and then have the flexibility to modify once you go.
Q: How did you build flexibility into the Blue Jeans model?
KR: The entire Blue Jeans business model was built on the idea that we build this product, we put it on the Web, and people buy it based on credit card transactions. If you like Blue Jeans’ service, you get your credit out and you buy Blue Jeans. Lo and behold, we found out that with videoconferencing, at the end of the day, customers liked the service, but they didn’t want to spend $5,000 on a credit card.
So we had to modify and hire sales teams — which was not in the business plan — to actually go and do that, and move us away from online transactions. That’s a huge change in the business plan, but we were willing to make that decision right then and there and say, ‘We have to do it,’ rather than say, ‘This is our plan; we ought to try it.’
Remember there is a fine line between perseverance and stupidity, and you only know after the fact. You can keep trying the same thing, and if you break through, people say you are a genius. But if you keep doing the same thing and you can’t break though the wall, people say, ‘That guy is a moron.’
Q: The name ‘Blue Jeans’ is rather ambiguous. What made you choose it?
KR: People who do not think differently will always say, ‘Why did you call it Blue Jeans? It has nothing do with videoconferencing.’ But customers actually love the name. And one of the traits is once you hear the name Blue Jeans, you do not forget it. It also differentiates us from all of the videoconferencing players, because everybody starts with a V — video this, video that.
When you pick a company name, it doesn’t have to be closely tied to the technology that you’re solving today because as the company grows, you may have to pivot. You may have to go into a new market and so on. So you want a name that can be yours forever, rather than having to change it. … You want to come up with a name that can accommodate all future directions of your company. <<
How to reach: Blue Jeans Network Inc., (800) 403-9256 or www.bluejeans.com
The Ramakrishnan File
Co-founder and CEO
Blue Jeans Network
Education: Monmouth University — M.S., Computer Science
Why consensus decision-making can work, with the right team: Once you have your team, decision-making becomes easy. My style as much as possible is to have a consensus. Try to have consensus-oriented management team, where everybody has an opinion and then we sort of come to a consensus on a particular decision that we make. But one of the things I also encourage in the company is dissent. You need to have dissent in the company. People who disagree need to feel comfortable disagreeing with their management team, with their CEO publicly, and not be chastised for it. If a company is full of people who just follow your word all the time, that’s not going to be successful company. You need people who are confident voicing their opinion. And you as a leader need to encourage that . . . That fosters a great company.
On winning over investors as an industry outsider: For the investors, it’s always going to be a challenge because they’re thinking, ‘You don’t have any experience in this industry. Why should I believe in you?’ If you have a track record of building successful business, that goes a long way. So they can see patterns of what you’ve done and they can believe in that. But beyond that, when you present a compelling business plan — this is the problem of the industry and this is how I’m going to solve it — for an average person, it should make sense. If it doesn’t make sense, you’re not on the right path. If it does make sense, the investors get excited because they see an opportunity; and more importantly, there is an emotional connection because you’re coming in as an underdog, an outsider to the industry. Everybody wants to help an underdog win.
Like any pair of siblings, Neil and Gary Jaffe each view the world very differently. While Gary is focused on people and the quality of dialogue he has with his leadership team at Booksource, Neil tends to look at things from a more strategic perspective.
“I think about the challenges we have faced as a company in the industry,” says Neil, president of Booksource. “A big one was our transition away from the bookstore market, which historically has been our largest revenue stream, and focusing on the school market.”
The brothers are looking to keep Booksource, which is owned by GL group Inc., in a position to drive maximum revenue. The move to the educational market is part of that, as is the integration of digital media and e-books.
Managing such a transition is not easy, and that’s where Gary’s biggest challenge comes in. When he took over as CEO at GL group a couple of years ago, it was important to him to have the right people in place to help him with the transition process. Unfortunately, that wasn’t the case.
“They weren’t giving me any advice and guidance when it came to some of the decisions we had to make as a leadership group,” Gary says. “It was getting the proper feedback that I was looking for that those people weren’t giving me.”
As Gary viewed the situation, he was confident his leadership team knew what he wanted from them.
“We have a saying around here to give people explicit expectations,” Gary says. “Those people knew their role. They knew what we wanted. But for whatever reason, they just didn’t have the business acumen to give me the proper answers.”
Both Neil and Gary needed to find a way to solve their problems if Booksource was to perform to its full potential. The best course of action was to attack both problems and move ahead with a renewed sense of focus.
“If you have to do this and you have to do that and then you have to do this, why not just do it all at the same time?” Neil says. “People are going to be going through change. At the end of it, it’s all done.”
And so the brothers set out to make the changes they believed would put Booksource in a better position to grow.
Assess your team
Gary was very frustrated with his leadership team and the lack of feedback it provided. But despite that frustration, he still found himself questioning whether it was really a problem.
He got with his business coach and told her that one of his key people was doing his own job quite well. He just wasn’t offering much in the way of guidance to Gary.
“He’s just not giving me advice,” Gary says. “And she turned it around and said, ‘By all means, I feel like he is hurting you. You’re not able to get what you need from him, therefore he is hurting you.’ And I totally agreed with that. The person can be hurting you if they are not doing the extra that we are expecting them to do.”
Neil is quick to add that Gary is not lacking in the ability to do his job or make decisions on his own. Rather, it’s one of his strengths that he is eager to gather feedback and use that to make even better decisions.
“Gary always has a natural inclination to listen a lot,” Neil says. “Unfortunately, he wasn’t getting helpful answers. That’s where he recognized what needed to change. When he asked, he needed to get much better answers from people who were engaged or thoughtful or had different ways of thinking about things.”
Leadership is a very fluid process. If you’re not at least thinking about how you interact with your team, you’re not using that team to the best of your ability.
“You have to make changes with people who don’t listen enough or don’t lead from engagement among the staff,” Neil says. “You can either listen too much and not get the feedback and have a problem or you cannot listen enough and have great people giving you feedback, and you’re not moving things forward.”
In Gary’s case, it was the former and that needed to change. Once he made the decision that he had to replace some of his people, he had to determine what qualities and attributes the replacements would need to have.
“It’s the qualities that you are searching for that are most important,” Gary says. “Determine what those criteria are. That’s more important than having the person available that you’ve picked out.”
In other words, you can’t just pick a person who is different than the one you’re trying to replace. You’ve got to take time to know what qualities you are looking for and then go out and find that person.
“You’ve got to listen, you have to have this person meet other people and you have to get other people’s feedback and opinions to see if it’s really the right fit,” Neil says. “Get a lot of feedback from a lot of different people. Make sure you look at the criteria and go off the job description. Do all the things you would normally do when hiring.”
As he proceeded with his changes and found people who had the qualities he was looking for, Gary learned that he wasn’t the only one who had noticed a problem on the leadership team.
“One of the guys after he was terminated, one of the guys who worked on his team came up to me and said, ‘I knew it was only a matter of time. I’ve worked with you for 15 years, and I know you can only take so much,’” Gary says.
It’s OK to try to help a person to try to get them to provide you with what you need. But trust your gut when you think you’ve gone far enough and reached a point where it’s not going to happen.
“For me, it’s always a matter of, ‘Have I done everything to get this person to understand what I’m looking for when it comes to giving me feedback?’” Gary says. “If my gut is saying, ‘I’m not going to get them to understand,’ it’s time to make the change.”
Engage your team
As the personnel issue was being addressed, both Gary and Neil were assessing Booksource’s strategic direction. It was key that everyone be part of the changes that were occurring and be kept apprised of what was happening.
“If you’re strategically focusing on the right stuff, it’s going to make the staff better too because they will have less to worry about,” Neil says. “They are all focused and engaged and passionate about the right thing that is leading to good rewards. A busy facility is an energetic place and it creates a morale boost, a staff boost, an engagement and they feed off of each other.”
Booksource had always been open with its financial data and numbers, but Neil wanted people to feel like they had a real part in affecting those numbers.
“The first step is to get people engaged,” Neil says. “If you have the potential to get a bonus, you’re going to work a little harder to make sure that we as a team achieve that goal. ‘If we achieve that goal, I might get a little more money.’ It teaches the staff that a big order is a good thing.”
Neil says there is a lesson to be learned for management when incentives are introduced into an organization.
“It teaches the owner that that bonus and that engagement and showing them the number and giving them a goal and a target is a very positive thing for the organization,” Neil says. “People will work harder and faster and you need less people, and it all builds on itself.
“There are dozens of other ways to open the books to give people an opportunity to see what’s happening and to participate. Start small with opening it and providing some kind of incentive to people and then you’ll see the benefit.”
You’ve got to follow up beyond introducing incentives and sharing information. If you just do it once and let it fade away, your people will lose a lot of faith in you as their leader. But if you steadfastly follow up and stick to it month after month, year after year, you’ll earn strong loyalty.
The key is setting expectations and then meeting them.
“I want to know what the end result that is my expectation is going to be and try to figure out how to get there,” Gary says. “What would it mean? What would it look like? We do a lot of follow up to see if the decision we made is right or wrong. If it is wrong, what do we need to do to go back and get it on track and get to that desired end result?”
Meetings are held with management, and then quarterly with employees to provide updates with how the company is faring in meeting its goals.
“They can look and ask questions and say, ‘Oh yeah, at the beginning of the year, you said you were going to do 40 brochures, three new catalogs and this, that and the other,’” Gary says. “They know what we said we were going to do. The staff has to OK the plan from the managers.”
Getting your team involved in what you’re doing can only help you as an organization.
“It all goes back to that involvement issue,” Gary says. “Listening and taking feedback. We don’t feel you can make a better company if it’s straight from the top down. We need it both ways.”
Transparency also puts pressure on you to really think about the decisions you’re making for your business.
“You’re showing yourself so if you’re not doing everything right, people might realize, ‘Oh my God, they’re going to see my weaknesses,’” Gary says. “We all know we have weaknesses. That’s why we need the support of others to figure out how we can get over those weaknesses.”
As Neil and Gary look at Booksource today, they see a company that is much more focused on and much more engaged in what needs to be done.
“We’re having one of our busiest months in the history of the company,” Neil says. “And we’re renovating the big break room that we have, so there are tables out in the warehouse and a refrigerator out there, but it’s all tremendously organized. People don’t complain about it, people don’t grumble about it. They just have a tremendous amount of engagement and it’s because of the changes we made.”
Gary says employees feel just as much a part of the success or failure of the business as management does and that’s a good thing.
“By understanding it and getting people involved in reporting those numbers, I’m not responsible for the budget,” Gary says. “We all are responsible for certain areas of the budget and people have to watch it. They are accountable for it.” <<
How to reach: Booksource, (314) 647-0600 or
The Jaffe Files
Gary Jaffe, CEO, GL group Inc.
Neil Jaffe, president, Booksource
Gary: St. Louis
Neil: St. Louis
Gary: Bachelor’s degree, human development and family life, University of Kansas.
Neil: Bachelor’s degree in marketing, University of Illinois; MBA, Washington University in St. Louis
What was your very first job?
Gary: Camp counselor. It was a sports camp. This was their summer, and I needed to make sure that they enjoyed it. If the activity wasn’t engaging, we’d change that activity to find something that was fun for these kids.
Neil: My first real job was a busboy at a hotel restaurant. It taught me that you have to wake up early and work hard.
Who has been the biggest influence on your life?
Gary: No. 1 is my dad. I’ve been around him so long and I’ve listened to these stories and he’s preached these things over and over again, and I’ve had 30 years of training from him. It all boils down to character. He’s shown the character that Neil and I have taken not only in our jobs, but in our family life as well.
Neil: It would definitely be my father, but I would also say my older brother, Gary. He has taught me a lot about life and leadership.
Who would you like to meet, or have met from the past?
Gary: We spend a lot of time at Disney World and it was in the ’60s when Walt Disney had the vision of a place where families can go. I’d love to see what his reaction would be today.
Neil: George Washington. I’m reading his biography now.
Know what you want from your leadership team.
Get your people involved in meeting company goals.
Be accountable to your employees.
Customer focus no longer means just researching current and future needs in order to design expected or desired goods and services. Instead, a rising trend in business today is co-creating value with customers.
Value is created when a product and buyer come together within a particular use situation. Some examples include retailers getting the customer involved in the shopping experience to save time (Home Depot’s self-checkout) or costs (IKEA’s assembly and delivery by customers), smartphone personalization through app selection and Dell’s online built-to-order computers are others.
Another is utilizing management consultants who collaborate with clients to add value in research projects.
Co-creation of value can lower costs, increase benefits and improve the overall service experience for both the organization and the user. As the table below explains, co-creation of value has a dual emphasis on the customer and company as value creators and is an applicable business strategy in a wide variety of market contexts. Airlines, supermarkets, supply chains, theaters, theme parks and retailers have all embraced co-creation of service opportunities through self-serve initiatives such as check-in, checkout, price checks, information/purchase kiosks and other technology enhancements.
Value Creation and Marketing Opportunities
|Marketing Strategy||Market Emphasis||Value-Creation Focus||Corporate Examples|
|Market driven||Established market||Customer||Coca-Cola, Procter & Gamble, Toyota|
|Market driving||Emerging or imagined markets||Company||Google, IKEA, Virgin Group|
|Co-creation of value||Established, emerging or imagined markets||Customer and company (simultaneous)||Amazon, Apple, LinkedIn|
A great example of the new co-creation of value model is illustrated in the case of Crushpad, a Sonoma, Calif., winery. Crushpad is a state-of-the-art winery where customers choose their level of involvement for small lot wine-making — typically 25 to 100 cases — based on their interest in the production process.
The company allows customers to develop wine-making plans, engage in hands-on activities, such as sorting, de-stemming, crushing, fermenting, pressing into barrels, labeling and packaging bottles, and even distributing and marketing the products. Wine enthusiasts, restaurants and retailers have co-created value with Crushpad, and as a result, the business has launched more than 150 world-class brands.
The rock music industry has also experimented with co-creation of value. Radiohead’s “In Rainbows” album was sold directly to more than 2 million consumers who paid what they felt the music was worth. The symphonic band Renaissance also raised more than $92,000 from 860 loyal fans to record a new CD called “Grandine il Vento.”
Innovation and creative collaboration allow the smartest — not necessarily the biggest — companies to win in the marketplace.
Here are six questions to think about as your company ponders the idea of co-creation of value.
1. Do you strive to continually exceed customer expectations?
2. Does your view of value creation go beyond the firm (to include the customer)?
3. Do you actively seek to create an extended community of users?
4. Is personalizing the customer experience a major part of your marketing strategy?
5. Is your marketing team truly obsessed with researching and improving customer experiences?
6. Do you nurture and forge enduring business relationships with customers and collaborators?
Art Weinstein, Ph.D., is a professor of marketing at Nova Southeastern University and author of “Superior Customer Value: Strategies for Winning and Retaining Customers.” Visit his website www.artweinstein.com or reach him at firstname.lastname@example.org or (954) 262-5097.
Lily Sarafan got some angry phone calls at first. People wondered what her motivations were and what a home care company was thinking advertising its services with Google Adwords.
But for Sarafan and the owners of Home Care Assistance, the decision wasn’t about making waves. It was about making change.
“It’s funny when I think of it now, because almost every business known to man does some form of pay-per-click or online advertising,” says Sarafan, president and CEO of Home Care Assistance. “But at the time it was like, ‘This is a high-touch business. This is about people. How can you advertise online?’”
Being the first home care agency to utilize online search, even in 2005, is an early example of the unique approach Home Care takes to the in-home care industry — an industry that’s hardly painted as “innovative.”
The company has published a number of books about its care philosophies, which include offering classes such as senior yoga for clients and gourmet cooking lessons for caregivers. It also provides many of its caregivers with tablet computers so that they can log photos, videos and updates from a client’s home.
In the future, Sarafan hopes to have tablets in every client home, providing what amounts to a Facebook newsfeed for family members and friends.
As the only senior care franchisor headquartered in Silicon Valley, Home Care Assistance also strongly aligns itself with businesses that value innovation and entrepreneurialism.
“Being based here means that we’re not comparing ourselves so much to a Home Instead or a Comfort Keepers or typical home care agencies based in the Midwest as much as we’re comparing ourselves to Google and Facebook and all of these other amazing initial start-ups that were founded a couple of miles from where we are,” Sarafan says.
“We’ve used technology not just as a cool factor but to really push our business forward.”
But perhaps the biggest differentiator of all is the company’s growth model, which has allowed it to expand from its San Francisco Bay pilot office that opened in 2003 to 60 locations across 27 states, as well as four Canadian provinces and Puerto Rico — all the while preserving the quality experience its clients have come to expect.
So how do you replicate one wildly successful office across two locations or 10 or 20? Once you have the right growth model — Home Care Assistance uses an owner-franchisor model, where it franchises some stores while building company-owned locations — the first step is to carve out your road map.
Create a success blueprint
In 2005, the company aggressively launched its efforts to pursue the franchise avenue, selling territories to prospective owners while simultaneously opening its own locations nationwide. But after adding new locations in a number of territories, Home Care got a reality check from its new owners as they began implementing the company’s operational systems and processes.
“Everything seemed to be gung-ho,” Sarafan says. “We rolled it out across the network, and all of a sudden, it was like, ‘Wait a second. In Texas, we need to append care manager signatures. The system doesn’t allow for that. In Virginia, care notes need to be documented on a daily basis. You didn’t account for that.’ So it was a nightmare rolling out these systems and being all excited only to have everyone completely angry because they thought the system was inadequate.”
As successful as your business model is, you can’t duplicate that success if you don’t give others a format that they can copy. Because the company’s operational systems were developed and tested systems at its corporate site early on, they didn’t account for the diversity in it new locations. So they failed on a national scope.
“There are certainly a lot of business models out there that are successful, but when they try to replicate and open in other areas, they realize, ‘Oh wait, it’s different in different geographies,’” Sarafan says. “‘Or, ‘We didn’t actually codify this process correctly. Oh, wait, it only applies to this very first location that we opened.’
“The biggest part of the process of expanding our operations was coming up with tools and guides and operating manuals that reflect all of the practices that we think make this business successful anywhere.”
Some of it is basics — for example, updating your operations manual to include all of the best practices that have made your company successful so far. Information on areas, such as the company’s “balanced care method,” needed to be comprehensive and clear enough that anyone could pick it up and know how to handle a client issue step by step, Sarafan says.
When expanding quickly, businesses should also look at the way people access systems and processes.
“We realized that as great as all of these owners are, they were all very busy in their respective locations,” Sarafan says. “We can’t trust that the content that’s being delivered to their staff members or their caregivers is going to be uniformly excellent.”
After the experience of launching in disparate sites, Home Care Assistance made a number of investments in its site operations in the way of training and development. In 2006, the company launched a corporate intranet, giving employees and owners 24-hour access to corporate announcements, upgrades, tools, news and updates.
It also launched the first proprietary online university in the industry to train staff members and caregivers on how to execute the company’s model at any location.
Finally, Home Care Assistance has changed the way it rolls out new processes and systems. To make sure that operational systems work for everyone, the company uses a franchise “think tank” to help vet and test them before they are rolled out to the rest of the network. The owners represent a variety of geographies, tenures and operating models. Pooling feedback from the think tank has helped the organization launch new systems, such as its online university, almost seamlessly.
“People knew that we already had the buy-in, creditability and support of key owners within our network,” Sarafan says. “So we didn’t have that typical reaction, ‘What is corporate trying to do to us now?’ They knew that the leaders within the system already approved the system.”
Another benefit of the company’s growth model is that it focuses on growth through territories instead of franchises — the standard franchising model. This allows Home Care Assistance's owners to be extremely selective about new locations but also about the franchise owners it brings on to grow the business.
“We don’t have brokers out there who have a quota for a certain territory,” Sarafan says. “So if we don’t find an amazing, entrepreneurial, ethical, savvy, compassionate owner to develop a territory, we’ll just do it ourselves.”
The importance of carefully screening potential owners was a lesson the company’s leadership learned the hard way. With all of the initial excitement around expansion, Sarafan admits the company probably was a little too quick to bring on franchisees when starting out.
“At first, you’re just very excited and you think everyone can do this and everyone is as compassionate and committed as you are,” Sarafan says. “So one of the early mistakes is jumping the gun and bringing in your initial owners, not really testing for that organization or cultural fit. That can cause some discontent along the way.”
It’s hard to say no when people want to invest in your company. But you’re setting yourself up for failure if you don’t make sure that you’re growing with the right people.
Today, the company is much more judicious in selecting new franchise owners. While it still looks at whether or not someone has the working capital and desire to lead a franchise location, it also considers his or her personality and values. Potential owners go through a rigorous screening process, which includes meeting with various members of the executive team as well as at least five different franchise owners. Finally, they’re invited to visit several company sites to learn about daily operations, job responsibilities and culture.
The more detailed franchisee screening process ensures that people don’t enter into the business without having a good idea about what the business is, what’s expected of them and what the company’s culture is like, Sarafan says.
“When someone’s on the phone and says, ‘I’m looking for a part-time gig. I kind of want to be an absentee owner,’ and they have five people on the phone saying, ‘In your first year, there is a huge time commitment and you really need to be involved on a hands-on basis,’ that self-filtering happens,” she says.
Who you have running your business isn’t the only thing you want to be choosy about as you add new locations. If you can, you’ll also want to take fewer clients — at least, at first.
Before you gasp in horror — why in the world would you want to turn away business? — think of it this way: You want to grow to reach more customers. To reach more customers, you need to build your reputation in new markets. And to build your reputation, you need to maintain high customer satisfaction for the customers you have.
Currently, Home Care Assistance has the best ratio of client to care manager of almost all of its markets. With a smaller case load of clients to manage, the company’s 4,000 caregivers can visit clients more often, have better status reporting with family members and be more responsive. On the customer side, the result is better client feedback on surveys, more client referrals and high client retention. On, the business side, the company’s average weekly invoice is three times the national average for its industry.
“So the fact that we’re very selective with caregivers, we have smaller case loads of clients and we’re focusing on a fairly niche client … all of that makes it so that our customers receive the gold standard of care,” Sarafan says. “Almost every single one ends up being a VIP client because we don’t need 500 clients to turn a profit.”
Keep an eye out
Home Care Assistance's growing client base points to the fact that the company is well on its way. By 2014, Sarafan hopes to have 120 to 150 territories across the country and perhaps even overseas. But this future growth is dependent upon the ability of today’s franchises to execute to the company’s high care standards, she says.
A responsive field operations team is one way the company keeps franchise owners accountable to these standards. In addition to assisting owners with everything from emergencies in the field to new office openings and compliance, field representatives serve as strategic advisers, helping people evaluate opportunities and stay innovative.
For example, every owner enters activity at his or her location into a companywide CRM system, accessible through the cloud.
“We can log in in real time and see what’s happening,” Sarafan says. “And then we might say, ‘Did you know you had this great partnership with the Alzheimer’s Association, and they sent you leads? You’ve actually been able to help their clients through our in-home memory care program, but it seems as if you haven’t been in touch in 90 days. It seems like this is great partnership that you shouldn’t let go of.’ So we’ll be able to send those recommendations remotely.”
Being able to offer these kinds of suggestions keeps the company culture entrepreneurial because it gets the company’s employees and owners constantly thinking about partnerships or growth opportunities, many that they may not have considered. These are simple things that people coming from the outside can explore to take the company to the next level, Sarafan says.
“We’re really there to help them optimize and maximize the experience in their communities,” Sarafan says. “We’re going to go there to give them some of the out-of-the-box thinking that’s not as apparent when you’re involved in the day-to-day.”
As the company focuses on the next goal — expanding its global footprint — it will mean a lot of new development and innovation. But by taking the same balanced approach to growth as it takes with its client care, it’s literally putting its money where its mouth is as it aims to break the perception that it’s just another home care company.
“The challenge is that physicians sort of come up to you and say, ‘Home Care? Oh yeah, I know Home Care,’ because there are a lot of companies that exist within this space, and health care professionals — they think they know,” Sarafan says.
“But almost everything we do is something that’s never been done before. So it’s not just saying we’re going to have caregivers in the home, but we’re going to have the best givers. It’s going way beyond that. It’s about creating that possible service, and every day, we’re striving for that new category of services that maybe didn’t exist before.”
How to reach: Home Care Assistance, (866) 454-8346 or www.homecareassistance.com
- Codify your systems and processes.
- Be selective about who you work with.
- Put in systems to hold locations accountable.
The Sarafan File
President and COO
Home Care Assistance
Born: Tehran, Iran
Education: B.S. in science technology and society and M.S. in management science and Engineering, Stanford University
What would you do if you weren’t doing your current job?
Nothing, really. Anything else beyond my world at HCA that I enjoy or feel inspired to do, I already manage to do alongside my responsibilities here.
What is one part of your daily routine that you wouldn’t change?
Keeping a running list of all my ideas regardless of practicality or timing.
What do you do for fun?
All things culinary. I have a passion for gourmet experiences and enjoy food preparation and presentation much like an art or architecture lover studies objects or design.
Where would you like to go that you’ve never been?
Outer space. The perspective would be intensely humbling.
How would you describe your leadership style?
I’m personally very interested in transformation. … I think if you’re always pushing the envelope in a strategic way then not only are you going to have a lot of job satisfaction as a leader, but you’re probably going to see that your innovations are going to make a real impact, that will hopefully positively influence people’s lives.
Branch Rickey, the Hall of Fame big league baseball executive of the 1940s and ’50s, famously coined the expression, “Luck is the residue of design.” This grand concept of cause and effect, which essentially says that good things don’t usually happen by themselves, stands as the cornerstone for anyone looking to build a successful business.
While it is possible to stumble into early success, if you’re in it for the long haul, you need to gain a thorough understanding of what it is you’re selling and how it relates to the needs of your potential customers before you act on it. It’s one thing to have a good idea and to make a few dollars at it, and quite another to duplicate that success on a larger scale or to sustain it for an extended period of time.
Get in the mainstream
Many years ago, I was brought in to be the public face of a protein bar that was successfully sold in health food stores and gyms, targeting body builders and active males. As popular as the bar was, it occupied a narrow niche, with limited potential for growth outside of its very specific market.
The company behind the protein bar wanted to get into the mainstream retail arena — big box stores and supermarket chains — but didn’t know how to do it. So I had a meeting with one of their executives in which he asked for my advice. He placed one of the jumbo-sized bars in front of me, and after thinking about it for a moment, I took out my pocket knife, cut the bar in two and slid it back toward him. He gave me a puzzled look.
“The original bar is designed for body builders — you need a smaller bar for everyday consumers,” I said. “You also need to make it fit a lower retail price point for the mass market. Oh, and put my picture on it, too.”
I went on to tell him that there were countless other protein bars out there, but if the average consumer sees my picture on the wrapper, they’d be far more likely to at least take a look at it because they recognize me.
The suggestions were simple but game-changing. The company implemented these changes, and in short order, we got the product into all the places we wanted, becoming the No. 1 protein bar in the U.S. Understanding the difference between what body builders and mainstream consumers wanted, while also taking steps to make our product stand out from the crowd, was critical to our success as we expanded.
Stay fresh and topical
It is also important for your business to stay fresh and relevant over time. Every day we hear about another well-known company filing for bankruptcy protection or folding altogether. The poor economy is partly to blame, of course, but if you look closer, it’s interesting to note how many businesses have struggled or failed to adapt to the changing marketplace.
Whether it’s a department store, a snack-food company or a company that specializes in photography, part of planning for continued success is being willing to do things differently than in the past. Simply saying, “This is the way we’ve always done it,” is a surefire path to disaster.
Because I’m pretty well-known, it surprises some people when I tell them that, by definition, I am still a small business owner. That is, I own my company, and I operate it independently. I partner with many large corporations, and together, we’ve enjoyed a number of great successes over the years.
Stay ahead of the pack
But I’m still always concerned about maintaining or improving my position in the market. For that reason, I take it seriously when I notice that someone I’ve worked with is not staying ahead of the curve. I may notice that I’m not seeing new products from them, not getting any new proposals or hearing about them moving ahead in innovation.
So as much as I may have enjoyed working with them in the past, I know that I need to take charge and develop products on my own or find other companies that are just as concerned as I am about staying relevant.
Staying ahead of the pack means meeting your customers’ demands by keeping up with innovative technologies, diversifying and introducing new products. And if you’re proactive and smart with your business, you just might wind up with a reputation as one of the luckiest people around. But, of course, you’ll know better.
Tony Little is the president, CEO and founder of Health International Corp. Known as “America’s personal trainer,” he has been a television icon for more than 20 years. After overcoming a near-fatal car accident that nearly took his life, Tony learned how to turn adversity into victory. Known for his wild enthusiasm, Tony is responsible for revolutionizing direct response marketing and television home shopping. Today his company has sold more than $3 billion dollars in products. Reach him at email@example.com.
Tony DiBenedetto will never forget “the watercooler incident.”
“We were in our very first office building, and at that time everybody was bringing in their own bottled water,” says DiBenedetto, who is the co-founder, chairman and CEO of the national IT services provider. “We wound up having this meeting to talk about what we were going to do about the water.”
He and the other two principals sat down to deliberate the issue: Would they use bottled water or filtered? What about enlisting a water service? The meeting ended two hours later.
“At the end of that meeting, I looked at my two partners and said, ‘Guys — we’re never doing this again,” DiBenedetto says. “This is insane.’”
Seeing the inefficiency around decision-making, the partners agreed that something needed to change. With Tribridge still in its infancy, they understood that the way they handled decisions in the beginning years would set the precedent for the company’s future.
“What it led to was an acknowledgement that we all three did not need to be included in decisions,” DiBenedetto says. “In partnerships, a lot of times everybody feels the need to vote on every single issue and talk about every issue, and it doesn’t allow you to grow very fast.”
What the watercooler incident demonstrated is the age old problem of “too many cooks in the kitchen” combined with the mistake of bringing in the wrong cooks. When there are too many people involved in a decision, it’s hard for people to accomplish anything quickly or efficiently.
And if people are also participating in decisions that don’t concern them, they won’t have time to handle the issues that do.
What DiBenedetto and his partners realized early on was that most people at Tribridge, themselves included, didn’t really know what decisions were and weren’t their responsibility. They needed to divide the decision-making so that each person and department had clear areas of decision-making authority.
Today, each of the company’s partners has specific items that fall under his decision-making jurisdiction. For example, anything involving strategy lands within DiBenedetto’s arena, and sometimes, all three of the partners.
“I feel like my role here is to drive strategy, so if we’re going to stray from the strategy that is a decision I would want to be involved in,” DiBenedetto says.
Not all decisions in the company should be pushed down the ranks either. When it comes to large financial transactions, debt, M&A or strategy, you definitely want your top leaders to take the lead. As CEO, DiBenedetto still offers his input if there is a major decision that people want feedback on or when it’s a hire or fire decision where his expertise may help.
At the customer level, however, he’s rarely involved in decision-making. When the company opened its first office in Dallas, for example, DiBenedetto told Managing Director Bobby Priestley that he was charged with making all the decisions concerning Dallas — and not just some of them, but all of them.
“People closest to the decision make better decisions,” he says. “We have consultants in the field and 3,500 customers. They’re out there making decisions for a customer. They are in the best position to make the decision. They understand the customer’s needs. They understand what the firm can do.
“So to have them elevate that through a series of management layers is ridiculous.”
Rarely if ever has DiBenedetto seen a good decision that satisfied a customer but impacted the company negatively. That’s because the customer feedback loop can typically tell you whether or not employees are on the right track with their decision-making.
“We’ve got a nice built-in check and balance there — where if decisions are good for the customer, they’re good for Tribridge,” DiBenedetto says.
“In my 14 years at Tribridge, I’ve never felt like, ‘Oh my gosh, this person is such a rogue decision-maker, and I have to reel them in.’ I’ve never felt that at all — zero.”
Say what you need to say
When you have a lot of people making decisions every day, effective internal communication becomes much more critical. If communication breaks down, and decision-making becomes siloed, your company invites conflict within departments and across them.
“We probably have 100,000 decisions made a day, and the way our business works, we have 450 people making those decisions every day,” DiBenedetto says.
“A lot of times we make decisions but we don’t tell somebody either why we made it or even that we made a decision. So you might do something for a customer and not tell them, or you might do something internally and not tell somebody. Being able to communicate the decision is another lesson learned.”
One way to keep everyone apprised of important organizational changes or information while preserving decision-making autonomy is to have set meetings to share updates, talk strategy and discuss progress on goals.
At Tribridge, the company currently holds a monthly meeting for its national leadership team in Tampa as well as an all-company meeting each February, where more than 400 employees meet in-person at a chosen location. In addition, it conducts an all-employee phone call once a month.
Regular meetings are a great opportunity for people to bring topics to the table, submit questions and voice any issues or concerns that could require outside attention. But a two-hour meeting about bottled water? Absolutely not, DiBenedetto says.
In the case of the watercooler incident, it wasn’t the meeting itself that caused inefficiency. Rather, inefficiency occurred because the people in the meeting didn’t need to be there. So instead of vilifying meetings, which can contribute to productive, creative and helpful communication, the company does the opposite — it encourages them.
“One of the culture points for us is the very open communication process,” DiBenedetto says. “Most people here are very comfortable raising topics. So anybody can call a meeting. Titles are not involved. We don’t put titles on our business cards. It’s an open culture where people can call a meeting if they need to.”
However, another rule at Tribridge is that if anyone ever feels like they are in a meeting that they don’t need to be in, they are completely free to excuse themselves.
“They can say, ‘Hey listen, I’m not going to contribute to this meeting, so I don’t need to be here,’” DiBenedetto says. “It’s not looked upon as a bad thing. The culture of the company is not just to meet for meeting’s sake.”
The bottom line is that you don’t want to shackle people with endless meetings or ask them to check in constantly about their progress. This defeats the purpose of pushing out decisions in the first place. Once you give people power over decisions, you also need to give them the freedom to succeed or fail.
“I can’t come back later and constantly start micromanaging,” he says. “So part of it is a leadership point that you’ve got to allow the decision and the success or failure to happen. If it doesn’t happen, then nobody learns from it.”
So after any big decision is made at Tribridge, whatever group that is involved in that area of the business, whether it is a client, a region or the entire company, is also involved in a debriefing process. This step reinforces that every decision, good or bad, is a learning experience for your business and your employees and the key to continuous improvement.
If the decision was good, ask why was it good? How could an OK decision have been better? And what went wrong with the bad ones?
“You have to be able to keep learning from it,” DiBenedetto says. “It’s a skill set. So you get better at making decisions the more decisions you make. The fact that we have these hundreds of thousands decisions being made every day means our people are better decision-makers than if they worked somewhere else.”
Empower the right people
In the tech business, where you’ve got to be rapidly changing and adapting your business all the time, you can’t afford to have a culture that puts individuals on pedestals, DiBenedetto says. When you trust people to make important decisions that impact your customers, you need to feel confident they’re focused on helping the customers, not themselves.
That’s why DiBenedetto prioritizes a person’s cultural fit over his or her resume when he hires someone for a position of authority at Tribridge. Specifically, he looks for whether the person has the trait of “entrepreneurism.”
“The first thing we tell people who come to work here is that when we say ‘think like an entrepreneur,’ there are two elements of that,” DiBenedetto says. “One, keep improving Tribridge; two, really on an everyday basis when you’re working for a customer, pretend that you’re one of their shareholders. When you’re thinking like a shareholder for them, you’re making the best decision in their interest.”
Hiring for entrepreneurism doesn’t mean you only want people who plan to start their own companies or create new products. Instead, it defines a person’s willingness to take risks, make changes confidently, and guide the decisions based on how he or she thinks the customer’s business is going to go, DiBenedetto says.
“Culturally, it’s looking for people who have an entrepreneur’s mindset, who are comfortable making decisions in risky situations,” DiBenedetto says. “The easy decisions aren’t the ones that you are worried about. It’s the tough decisions where you want somebody who has more of an entrepreneur’s mindset making them.”
To get a feel for this trait when hiring, the company’s recruiters first ask job candidates to provide broad situational examples, such as a time when they used teamwork or faced a tough challenge. Then they use “critical behavioral interviewing” techniques to analyze the candidate’s behavior in those different situations. What they did when they made a mistake or when they had to give negative feedback?
“We’re looking at how they handled it, not the answer to the question,” DiBenedetto says.
“You’re not asking them about being honest. You’re asking them about teamwork or something else; and they start telling you the story. And you keep drilling down until you get to a situation where you have witnessed through their story what their behavior was. So it’s a crafty way of doing it.”
In behavioral interviewing, recruiters also look at the way people phrase statements and the subtleties of what they say. This can help you identify red flags in a person’s cultural fit. Big egos, for instance, don’t bode well when you’re making decisions for a team.
“Sometimes you’ll ask somebody, ‘Tell me what someone else on the team does,’ and they’ll answer the question by telling you what they did,” DiBenedetto says.
People who are new to an organization with decentralized decision-making may not feel confident making lots of big decisions right away. But by hiring people that fit well with the culture, demonstrate entrepreneurism, and are team players, DiBenedetto finds that most people can succeed in this kind of empowering environment.
“When you surround employees with people who help them all the time, that aren’t in it for themselves, that plan a team environment, and they are empowered to make decisions, they tend to like it,” he says.
“It translates into better decision-making, faster decision-making and therefore things happen quicker here. There’s a sense of urgency to get things done as a result of that, and that leads to growth.”
While DiBenedetto had some initial reservations about using a decentralized decision-making structure, today he can’t imagine doing things differently at Tribridge. From 2006 to 2009, the company grew its revenues 272 percent, generating $65 million in 2011.
“We’ve grown dramatically over a 10-year period,” DiBenedetto says. “We’ve had 9/11, multiple wars — we’ve had a tech bust, a real estate bust, a credit crunch. Yet our company continues to grow organically pretty quickly, and it’s because we have decentralized decision-making.”
How to reach: Tribridge, (877) 744-1360 or www.tribridge.com
- Give people clear responsibilities.
- Make meetings more efficient.
- Hire people who can make decisions.
The DiBenedetto File
Co-founder, chairman and CEO
Born: Brooklyn, NY
Education: Florida State University
What was your first job?
A paper route
What is one part of your daily routine that you wouldn’t change?
Waking up my daughter
What would your friends be surprised to find out about you?
I write a lot, especially poetry.
What’s the biggest challenge in the future growth of Tribridge?
The strategy for us to get to the next level has been built around something we call ‘Concerto,’ which conceptually is the brand that we’ve coined for the business we’ve moved to the cloud. If you think about Tribridge, we do services for customers and we use a lot of different technology. We’ve built a private cloud and we’re offering this technology that’s some Tribridge intellectual property as well as Microsoft’s applications. We’ve integrated that and offered it to our customers. … The next five years if I look at tremendous growth — that is it. With that come some opportunities and challenges. One is where are the next 500 consultants going to come from? We’ve got to find the next 500 team members.
What trait does a leader need to be successful in today’s business environment?
With the really turbulent economic times we’ve had the last 10 years, we’re lacking the thinking big — blind confidence. We’re lacking the ability for our leaders to think bigger. Because it’s humbling to know that things are unpredictable, we all get stifled in our decision-making. Thinking bigger is something I see as an attribute that allows people to fight through the stifling news that you get from watching or reading the news. We’ve got to ignore that, keep thinking big, expect more. Expecting more is really about how can I make this better? How can I keep getting better? So if I’m thinking big and expecting more at the same time, that’s just driving success.