Brown Smith Wallace LLC made decisions in 2009 that many companies probably can’t say they replicated. The accounting and business consulting firm didn’t have large layoffs, it didn’t cut back contributions to employee 401(k) plans, and it didn’t renege on employee raises.
That doesn’t mean the firm didn’t face a year filled with difficult choices. Many changes were made as the company worked to keep revenue steady at $26.4 million. Regardless of whether your company is facing good or bad times, there are essential elements of leadership you must maintain, says Harvey Wallace, co-founder and managing member. You must keep employees engaged and informed, perhaps even more so during financially tough times.
“You need to work a lot harder in down times than you do in good times to get the message out there,” he says.
Wallace stays connected with his 212 employees through multiple streams of communication and setting a context for how the firm is performing financially.
Smart Business spoke with Wallace about how to keep employees engaged.
Communicate to engage. It starts by being out front with employees and communicating what your vision is, letting them know what the expectations are. Our vision is to be recognized as the premier firm in our chosen market as demonstrated by the pride of those associated with us, our people and our clients. It’s setting expectations, communicating with people and continuing to work to move the organization forward.
No one wants to be with an organization that is either stagnant or moving backward, and so 2009 was one of those years where it was incumbent upon leaders that they keep that mood in place. Negativity is not something you can afford to share with your people.
Stay in front of employees. The word that we all like to talk about is communication, and it comes in many forms. At one of our firm meetings in late 2008, we, as most other companies, did realize there was a recession. It was either there or it was about to arrive. At our firm meeting, we addressed that head on, and our words were, ‘We choose not to participate.’ It gave the message to employees that we’re going to continue to keep heading in a positive direction and we understand that it may be difficult, but, as I said, we choose not to participate. That’s just an example. E-mail messages from me as managing partner, trying to update people on things that are going on, communicating any major changes in the organization.
It needs to be something that comes through not just the top management, but I think it needs to come through different levels of management. For example, in our firm, we have five different operating units and each of those operating units has a partner who is responsible for that practice. It certainly is coming from me as the managing member, but as we go down through the organization, it needs to come from direct supervisors of people in different practice areas so that they’re getting a consistent message that is communicated through technology, through e-mail, because that is how we all communicate these days, but [also] on a one-to-one basis so that the message is constant, it’s repeated and you avoid mixed messages.
It is important to make clear to the managers what our goals are and how we’re going to achieve it so that they are knowledgeable and can share that message with the people who report to them. That’s my job to make sure that our managers are informed and a part of the decision-making process and keeping everybody positive. I can’t repeat that enough. You have to continue to keep people positive because a culture that has been built over 30-something years in business can easily come tumbling down. We spent 37 years building our culture and building our firm, and we couldn’t and no business should allow one bad year to change the direction and the message.
Share financials. The annual report, as an example, we started doing that four or five years ago. It’s a summary of our performance during the year that’s just ending. We publish it in December; we send it to the homes of our employees so that it’s something they can share with their families.
It’s everything from financial statistics to information on major new clients, to practice areas, new individuals that come into the firm, we highlight people who have had significant anniversaries with the firm. The annual report is just that; it’s a state of the firm in the past year and, of course, ... how we’re doing compared to other years. I certainly think that’s one thing that is important to provide to our employees.
(A) firm meeting is ... the spoken version of the annual report. Our goal at that point is to provide a lot of the same information to employees.
Even in bad times, employees get comfort looking at our statistics, our revenue goal achievements, so that they can see that the organization is moving forward. It makes them feel a part of the organization. As I said, we want to share that with the families because there are 200 families who are a part of this organization, and we take seriously our responsibility to those 200 families. It brings them into the process, understanding who the firm is, what our values are, how we’re moving forward.
It is just so vital to everyone to understand the finances of their organization. Our information tends to be high level as opposed to every detailed line item, but certainly what I think employees, and every member of an organization, can certainly appreciate and understand is the revenue. Is the firm growing? Is the firm headed in the right direction?
Obviously, many public companies, all of their information is available, but I think more and more private companies are going to share information with their employees.
How to reach: Brown Smith Wallace LLC, (314) 983-1200 or www.bswllc.com
It was Jan. 1, 2009, when the world learned that the well-known wealth management firm had been acquired by Bank of America Corp. With the economy already struggling, this was yet another reason to be scared. But Martin’s diligence about planning left him in a strong position to deal with the uncertainty that arose.
“One of the early lessons that evolved for me in leadership was to continue to adapt as a leader,” says Martin, managing director for the St. Louis Metro Complex of Merrill Lynch since 2005.
“I’ve always been a big believer that having a plan is important for any kind of business that you run. A lot of times, business owners are very entrepreneurial or very defined by the specific product or service that they produce. But they don’t have the experience or haven’t had the luxury of being in a position where they build an organization around it.”
In other words, it’s great if you grew up working on cars in the garage with your father and parlayed that knowledge into a chain of auto repair shops, but if you don’t know the mechanics of managing people and following a budget, your ability to fix a busted alternator may not be enough to keep your business going.
“Having a plan is important at any level, and then secondly, communicating that plan is paramount to getting the buy-in and getting the success of the employees in the organization,” Martin says. “That helps specifically all the way through the life cycle of the business.”
More than a year after the acquisition by Bank of America, both Martin and Merrill Lynch have adapted. The overall company registered $23.3 billion in 2009 revenue and Martin did his part to keep things moving with the nine offices and 200 financial advisers he oversees in St. Louis.
Here’s how Martin stays organized and stays in touch with his employees to make sure everyone understands what’s going on.
Know your purpose
It sounds simple enough, but do you know why you’re in business? Have you ever thought about it? If you haven’t, you need to start.
“You’ve got to have identification of a mission statement of what you’re about,” Martin says. “What’s the purpose of your enterprise? What are your goals and objectives for that? Once you identify that, you can decide the approach and strategy of how you want to operate the business, conduct the business and fill in the other parts that help you along the journey.”
You also need to secure resources to invest in your business and start breaking down your financial metrics.
“But all that is much more difficult if you don’t start with being grounded as to what your mission statement is and what you’re about and the broad-based goals and objectives,” Martin says. “If you properly address having a mission statement and having goals and objectives, you’re able to develop a comprehensive longer-term business plan. It’s very much part and parcel to the whole consultative approach we have for wealth management.”
The goal when helping clients with wealth management is determining what the clients want and mapping out a plan for how they can achieve that goal. It works the same way with a business in that you shouldn’t expect that you can do it all yourself.
“You have to have the right kind of mentors and advisers around you,” Martin says. “Advisers can be a board of advisers, they can be key client relationships, they can be key employees in the mix. It can be external partners that fulfill advice competency to your enterprise that you don’t necessarily warehouse within the business enterprise. … The advantage of working with mentors and boards of advisers is to draw upon their experiences in having similar paths of professional experience.”
The effort to be able to clearly state what you do and show what your business is all about and demonstrate planning will pay off in your ability to retain employees.
“The fact that you have it and the fact that you can stand up and communicate it to your employees as it relates to an overall plan for the business and the vision for the business puts you in a much better position to have employees who view your company as being something on an enduring and sustaining basis,” Martin says. “It all ties back. The existence of the plan puts you in a better position to articulate and communicate to your employees and to your clients what your company is about.
“Take a business where there’s X employees and it’s just a job and they show up and they punch in and punch out and it’s a place to collect a check,” Martin says. “They don’t feel like they are part of a bigger thing. They’re not locked into the mission of what they are fulfilling to the client and other possible goods that a company exists for.”
By attaching a purpose to your company and a clear reason for being in existence, you give your employees a foundation to stand upon.
“When companies define themselves much more broadly about an enduring purpose, the clients understand that and the employees are there as more of an avocation as opposed to a job,” Martin says.
Talk to your people
Planning can’t just consist of you issuing directives and strategies about how you want things to be done. You need to get feedback from your people on what they think about what’s going on.
“The first tip we all learn is that it’s a lot easier to get other people talking about themselves,” Martin says. “For a person that is a little bit more uncomfortable doing that, I think going in with a couple of good open-ended questions takes the pressure off. Go to an employee and say, ‘Tell me what’s going on in your life. How have you been? How’s work been going?’
“If you just shut up and listen, it takes a lot of that connectivity pressure and communication pressure off yourself. It puts you in a little bit better position when you are put on the response podium to communicate and deliver back to them. That holds true in the context of a business organization or a social setting.”
You also need to take some time to think about who you’re speaking to, in whatever setting you encounter them.
“Always try to think, ‘OK, who is my audience? What’s important to them today? What is it that they want to hear about?’” Martin says. “There are a lot of things that I think are important on my agenda that I want to get communicated, but if it’s coming off as me-centric or organization-centric, it’s not as relevant to the particular audience I’m talking to. I have to tweak it and figure out how I can accomplish the things that still need to be communicated, but do it in the setting of what’s important to the listening audience.”
Just as you plan for your company’s future and you plan when you have a problem, you need to plan when you’re going to speak to your employees.
“It’s always a helpful exercise to do your prep work about what it is you want to talk about,” Martin says. “Then back up and think, ‘OK, let’s think about the listener. What is it that they want to hear?’”
This is where your ability to stay true to yourself becomes vital. It’s a lot easier to speak with integrity and honesty when you’re talking about something you truly believe in and feel passionately about.
“You’ll come off as knowledgeable as opposed to you’re asked to speak on a topic you know nothing about and you have to go research it and it’s more likely you’ll have to operate off some kind of script because it’s not about something you’re inherently part of,” Martin says. “We try to authenticate the way we communicate. We try to use relative examples that the listening audience can relate to and put it into concepts they can relate to.”
If it seems like you’re having a problem getting employees to believe what you’re telling them when you speak to them in a group setting, maybe it’s because you don’t talk to them on a regular basis.
“You have a plan, you communicate it to your troops, you revisit that on a periodic basis,” Martin says. “That keeps you in the habit of doing it. If you never do it and then you wake up one day and say, ‘I’ve never sat up here as a business leader and communicated what we’re about,’ it’s going to be a pretty awkward presentation. Everybody is going to go, ‘Why is he doing this? We never do this.’ And you’ll be rusty at doing it. Like a lot of things, practice and frequency make you better at doing it.”
Some people carry a micro-recorder with them or on their phone that they use to keep track of things, but for Martin, he just takes notes with a pen.
“I keep a little pocket sleeve on the inside part of my jacket and a pen,” he says. “The first thing I did this morning was I went down the hallway to meet with one of our top advisers who was out meeting with a significant corporate relationship yesterday. I wanted to know how the meeting went because I knew it was an important meeting.”
When Martin left the meeting, he jotted down a few notes that he deemed important.
“There was every potential it could be another hour before I got back to my office because I might get stopped along the hallway talking to other people,” Martin says. “I record things and I try to keep a daily log in a side drawer where I sit at my desk. I’ve tried to capture things in the course of a day. It could be thematic things that I’m starting to see systemic repetition of. It could be anecdotal pieces of information. It could be a good idea I want to share across the broader population of the employees. It could be a people issue that we need to address. Whatever it is, I keep a master list.”
No one questions the value of face-to-face communication, but it’s not as easy to keep a record of what’s being said when it’s not in an e-mail, text message or voice mail. So as your company gets larger, you need to find a way to keep track of what you hear so that you can process it and possibly incorporate it into your organization.
“Then at the end of each week or before I leave on Friday or even when I come in once on the weekend, it’s easy for me to get over and plan my week ahead,” he says. “By the time you’re running a $300 million or $400 million business with 300 or 400 employees, you’re going to have a lot more issues come up than something on a smaller scale. At some level, you can keep track of it in your head, but at some other point, you’ve got to move beyond that.”
How to reach: Merrill Lynch & Co Inc., (800) 637-7455 or http://www.totalmerrill.com/
By the time financial markets around the globe started to tumble in October 2008, much of the manufacturing industry was already deep in a recession that had stretched across the better part of a decade. Millions of workers had been sent home, their labor and their experience no longer needed because of more efficient machines and the rise of globalization. Thousands of factories had been shuttered. Whole companies just disappeared. None of it was coming back. It was all gone for good.
Manufacturing was not, of course, the only industry hit hard prior to the start of the larger recession. Publishing and newspapers had been on the decline for years, and the domestic automotive industry, technically under the umbrella of general manufacturing, had been in a slide for a generation. But perhaps no industry was affected more since the turn of the millennium than manufacturing. About a quarter of a million manufacturing jobs were lost over the course of a decade, the large majority of them prior to 2008. As the recession spread from one industry to another, millions of workers were laid off from the collective work force, but manufacturers often still let go of the most employees.
The cycle was vicious, and it continued, month after month.
How is it possible, then, that less than two years after the economy turned, manufacturing is on the rise again? Manufacturing activity increased again in May, according to the Supply Management’s index, the 10th straight month of growth. And even though that growth has started to slow a bit, growth is still growth. Were the 2008 levels just so low that any growth is significant? Or is the sustained increase in manufacturing a sign for the rest of the economy? Nothing is certain, not yet, but all of the indicators do point up, however modest, rather than down.
“When we were going through this mess, we had to cut everything down to the bone to survive,” says Mark Birsinger, owner, M.A. Birsinger Co. LLC. “You had to survive in order to be there when the sun came out. And the sun is coming out and the sun is up. My opinion is, if you have made it this far and you’ve still got a good book of business and you’re not in financial straits, you’re going to make it.”
Prepare for more change
What was normal two years ago will almost certainly not be normal during the second half of 2010 or even during the first months of 2011. What was normal then, in fact, might never be normal again. However much it might be a cliché, change really is the new normal in manufacturing and plenty of other industries, too.
Among those changes are the new gaps in the supply chains of some larger original equipment manufacturers, the result of smaller companies closing during the last couple of years, which might cause delays and problems in receiving supplies in a timely manner. A number of industry experts say the availability of credit will also likely change, with banks starting to somewhat relax their requirements for the first time in two years. But the biggest change might be the addition of manufacturing jobs.
“Manufacturing is now the only business sector that has been adding jobs for five months,” says Emily Stover DeRocco, president, The Manufacturing Institute. “Manufacturers have added 126,000 new jobs.
“But the focus is going to continue to be more on what we call mass customization, as opposed to mass commoditization. This reflects, again, the industry’s response to globalization, which is that U.S. manufacturers, in order to maintain their global leadership, have had to move to a higher quality and a higher value product.”
And that higher quality product will almost certainly lead to more changes in the way manufacturers and so many other companies plan and do business. It is the ripple effect across industries.
For example, if you have not already reassessed your vision and your plan for your company especially in terms of negotiating for the best terms that should move to the top of your priority list.
“You still have to get the best terms,” Birsinger says. “A lot of my clients are hesitant to go and tell that vendor or that supplier, ‘I need this. If you want to keep me as a customer, I need these terms and I need you to do this for me.’ So many small businesses think they do not represent enough of an order for their vendors to go and negotiate tactfully but aggressively.
“Whether you’re ordering $1,000 or $50,000 worth of stuff, that order represents business for that company, and they are willing to do whatever they can do to not only keep you as a happy customer but, more important, keep you as a customer. A number of my clients think they don’t have the leverage to negotiate better terms.”
That can also help you better position yourself and your company for the continuing changes and the eventual uptick in the economy and the industry.Keep the long term in perspective
Two years ago, few manufacturers few companies at all, really were prepared for the recession. But you can prepare for the ascension, however slow and modest it might be, by being smart during these coming months and years.
You might think about diversifying your product lines into other markets so you aren’t as dependent on single-source customers and, more generally, diversifying your portfolio. You might also research how to best tap in to loans, grants or tax credits that are available from various levels and departments of federal, state and local government to help increase business during challenging times. And you will likely want to consider your risks, especially over the long term.
“You’ve got to know what you do best,” Birsinger says. “You’ve got to know why you’re doing it. And you have to do it the best. I think that’s a question everyone needs to examine. Everything is different. Many of my manufacturers are not manufacturing exactly what they did in ’07 today because everything has kind of changed. You have to look at everything and re-evaluate it, and the best way to do that is a SWOT analysis. Everybody can brag about the successes and the opportunities, but truly the weaknesses and the threats are the value in that analysis.”
Technology and education, as would be expected, can also play a role in increasing your business. Several experts discussed how the advantage of companies that are owned and operated in the United States is the technology that is developed in the United States. Domestic manufacturers continue to be at the forefront when it comes to utilizing technology in their processes, a trend that will only continue. To ensure that the technology is operated correctly and efficiently, workers should be more educated than they were 40, 20, even 10 years ago, and with so many quality workers still unemployed, there is a deep talent pool from which to hire.
“Manufacturers need to hire and retain smarter workers,” DeRocco says. “As you have the intersection of technology and manufacturing in a much more complex global economy, the work force needs to become educated and skilled what we call a 21st-century, high-performance work force.
“Most of our workers need a secondary education. A high school degree is no longer sufficient. Our reform will actually grade the competencies and skills that manufacturers now require of their employees into high school and community college programs of study. But it is important for manufacturers to also increase the skills of their current work force.”
How you handle all of that now might be the difference between a quicker return to profitability and increased production, and the far less appealing option of a long struggle back to respectability and some small sense of comfort in the market.
Most important, though, is to do everything with the long term and that refers to years and decades, not just months and quarters in mind.Ask questions
As you prepare for the last months of 2010 and the first months of 2011, it will be important to keep any number of questions in mind. Write them down. Type them and print them out. Keep a copy on your desk. Distribute copies to your executive team, perhaps even all of your employees. Just keep them in mind. No matter how well you know your business and your industry, that list of questions will be as important now as it has ever been.
And just what questions should make the list? Well, a lot will depend on your industry, your goals and your financial standing at the moment, but there are some questions that all businesses need to be asking right now. And those are: What is happening in your industry? Is it expanding or contracting? Is your company expanding or contracting? Where do you see your company in 2015? In 2020? Is your company in the right market? Is it in the right position in the market? What are the strengths and expertise that your company has that could be adapted to another market or product line? Where can you turn to think through your situation? Will your company be able to receive a large enough line of credit during the next year? Will you be able to fund your growth? How sustainable are the current demands? And, the great unknown, how will global events affect your company?
“With the crisis in Europe, everybody’s kind of ultrasensitive to issues and to going out to a lending land, if you will,” Birsinger says. “Everybody’s on edge and everybody’s trying to understand the new economy for small business. All the rules have changed. Really, there aren’t a whole lot of rules right now. Everything has kind of changed, everybody wants it a different way, everybody needs it a different way and few are willing to keep inventories like they did before the recession.”
With all of that in mind, you will also need to consider whether your supply chain will be able to respond to the innovative approaches required for future growth and success, which means supply chain capabilities and locations become more important. The demographics of your work force are also important, especially with a generation of baby boomers still on the brink of retirement. And innovation is important, too. How will you move ideas from the collective mind of your company to the drawing board to the marketplace? Live in the present but remain focused on the future.
“Eyes on the future, but remember the volatility of this market,” DeRocco says. “There’s a constant threat to every business sector and there are some very large factors in play right now that will determine manufacturers’ cost structure for continued operations, so they’re keeping an eye on all of those public policy, the global impacts around the world, certainly the European financial crisis.
“Every one of those issues has an impact and creates new challenges for manufacturers operating in that environment.”
Paul Cahn, founder and co-chairman at Elan Polo International, doesn’t spend a whole lot of time worrying about it either. But he says it would be a mistake to assume that any product, even one as common as a pair of shoes, is a lock to be needed forever and ever.
“The world we’re living in today, who knows what we’re going to need,” says Cahn, who founded the footwear company in 1976. “We might all be floating in another 25 years instead of walking.”
It’s this unwillingness to make assumptions that helps Cahn stay in touch with his customers’ wants and desires and push more than 45 million pairs of shoes out the door and into the hands of retailers around the world for sale each and every year.
Making a sale to every customer is not the priority for Cahn.
“We’re only interested in the prolonged relationships that we create with customers,” Cahn says. “We feel that customers are a lot smarter than we are. So we want to listen and see what they are really looking for and what they really want or what they really need. That’s where it starts. We try to service them. The idea is to have what they need or to be able to create what they need. As far as selling is concerned, listening is as important as selling.”
When you’re a good listener, you learn about what your customers are looking for and reduce the odds that you’ll be caught off-guard by a sudden change in customer demand. You just need to make sure that you’re listening to your customers and studying your industry to see how trends are changing.
“Today, I can pick up my iPod or cell phone and I can find out right there what the hell I’m looking for,” Cahn says. “It makes it a much more competitive market. It’s simpler today to keep up than it ever was because we have so much information available. But it’s a lot more competitive than it’s ever been because there is so much information available.”
Here are some of the ways Cahn helps his 500-employee company stay poised for change and positioned to endure it when the times turn tough.Be a problem solver
Aggressiveness is not the key to pleasing your customer. It may help you make a sale, but if it’s not something that a particular customer really wanted, he or she probably wouldn’t return to buy additional products from you.
“Knowing your product and knowing how it fits in with your customer is the name of the game,” Cahn says. “In the long run, the solicitor of your product, the more he knows about his product and the need of his customers, the better salesman he will be.”
Cahn recalls a business trip he made shortly after he got married that illustrates his philosophy about what constitutes a true win for a salesperson.
“My wife asked me, ‘Did you have a good trip?’” Cahn says. “I said, ‘I don’t know.’ She said, ‘Did you sell anything?’ I said, ‘Oh yeah, I sold something.’ So she said, ‘Well, then you had a good trip.’ I said, ‘No. Did my customer sell it or get good use out of it?’ Selling again is just part of business. It’s part of life. Being able to sell doesn’t mean that the product will be successful with who you sold it to or whether you’ll have a happy camper. … Selling is an art and a skill. It’s not the act of tuning into your customer to get him to favor you. It’s whether the product you sell to your customer, it’s that he’s doing better with your product than with the next guy’s product.”
This doesn’t mean that you shouldn’t care about making a sale.
“Of course we want to make a sale,” Cahn says. “But if you don’t have the product an informed customers needs, you can’t make it. That happens all the time. If it happens often enough, I’ll be out of business.”
So how do you avoid such a fate?
“If you find out that you don’t have that product, as soon as that customer walks out, you’re going to try to work it out somehow,” Cahn says. “If it’s a common thing this customer is asking for, try to create that product for the next customer because he’s not the only one who is going to walk in looking for that product.
You need to work with your people to teach them to be aware and to keep their eyes and ears open to clues that customers provide about what product they are looking for.
“Management stays in touch with management of the companies we serve,” Cahn says. “There is a free flow of information both ways. We, of course, measure it by the amount of business we get from one year to the next or from one season to the next. When we visit customers, we study what they are doing and are pretty much aware of what the needs are for us.”
Talk to your employees about your product. Involve them in the developmental stage to see if it matches what they are seeing on the front lines as far as the desires of the market or the retailers to which you’re distributing your product. It’s these kinds of discussions that you need to have to ensure that customers keep coming back to buy your product.
“We bring them together and listen to what their needs are and tell them what our feelings are and work it out together,” Cahn says of the partnership between management and employee or retailer to best serve the market’s needs.
“We show them where we feel the future lies and how they feel about it and we sort of put it together and see whether that’s the product that is needed.”Be a team player
The economic meltdown of 2008 posed a challenge to retail businesses, including shoe companies. People still needed shoes, of course, but perhaps they didn’t need as many pairs or tried to make the pairs they had last a little longer.
The priority suddenly became sustainability. So how do you keep employees focused on getting to know your customers when they’re worried about whether or not they’ll have a job tomorrow?
“You do create fear,” Cahn says. “You not only create fear, you wonder how many of your best people are going to leave you and what the morale is going to be. We handled it in such a way that we wanted to make sure everyone was going to get through this. Let’s do it together. It isn’t just that we gave cuts to employees. We took substantial cuts ourselves to make sure that we could survive this.”
It’s one thing to ask employees to buy in to your business and your plan when times are good, but if you appear to abandon them when times turn tough, you’re going to have a hard time maintaining their loyalty.
So you have to make it clear that you stand with your people, even when you’re faced with letting some of them go.
“We handled it in such a way that there was no safe haven anywhere,” Cahn says. “At least we had a track record of managing our affairs and people had confidence in our ability to do that. They were willing to go along with it.”
Cahn says you can go a long way in earning the support of your people just by the way you refer to the business.
“I have never looked at my business as my business,” Cahn says. “I’ve always looked at my business as our business. It’s one team. I march with them; they march with me. What can I do to make them more motivated?
“When we fly anywhere in the world, I don’t get myself upgraded and have my employees sit in coach. I don’t stay in better hotels or have a different food allowance. We march with the troops and they know that.”
You can also take visible steps to recognize employees who go above and beyond the challenges to provide great service to your customers or provide a needed boost or fresh idea to your business.
“Employees should be compensated for good work beyond average work,” Cahn says. “One works better and faster than the other does and they should be recognized for that. If not, you’re going to have communism and that didn’t seem to work too well. Recognition is important. Recognize the different jobs that different employees do. They don’t all do as good of a job.”
As for the employees you have to let go, don’t make any promises you can’t keep. But you can offer them hope if you believe there is a chance they could be brought back at some point.
“We said to the ones we let go, ‘As soon as we can, we’ll rehire and you’ll have first preference,’” Cahn says. “It was just a very obvious thing that needs to be done. We can promise that you’ll be the first ones we’ll look at. You can make promises that if we hire people in the next six months, they’ll be the first ones you’ll consider.”
The hope is that when the economic tide does turn, you’ll be able to put people in place who have already been trained about your culture and know what you expect.
“At that point, you’re going to go after people that you’re comfortable with instead of going after new people,” Cahn says. “It’s very open. We have nothing to hide. As soon as our business stabilized and we could see that our customers’ business was stabilizing, we gave them back more or less what we had taken away. They understood what happened. We certainly kept them informed and after that, we started advancing people again.”
When you’re going through a tough time, you can’t eliminate all of the fear that your employees have and you actually don’t want to.
“If they’re not going to worry about the future, they’re not going to be good employees,” Cahn says. “We’re all worried, even if things are good. We’re all worried about making sure we interpret the marketplace. That won’t change.”
When you have conscientious employees, you stand a much better chance of having employees who can help your company understand its customers and do what needs to be done to drive growth.
“They see it every day whether we get the order or don’t get the order,” Cahn says. “It’s not necessarily a matter of price, it’s not a matter of quality, it’s not a matter of delivery, it’s not a matter of information. It’s a combination of everything. Over a period of time, they all show up. Your abilities against your inabilities will show up in the long run.”
HOW TO REACH: Elan Polo International, (314) 655-3300 or www.elanpolo.com
One of the key components of the recession has been the banking industry’s reluctance to extend credit to businesses across the country and around the world, putting a strain on many organizations.
Therefore, if businesses want to stay afloat in these tough economic times, they need to not only be able to collect the payments owed to them, they need to be able to collect them on time.
“More companies are turning to credit insurance to protect themselves during the economic downturn,” says Pat Cantwell, director for Aon Risk Services Central Inc. and a member of its Special Situations Group. “Credit insurance protects against the risk of nonpayment of trade debt, which are the amounts owed to you as a result of goods or services that you have supplied.”
While standard credit insurance covers insolvency and nonpayment for domestic and/or export trade, companies can also add protection for political, pre-credit and work-in-progress risks. Analysis in work-in-progress may also help prevent unexpected or negative outcomes in today’s volatile credit environment.
Smart Business spoke with Cantwell about credit insurance and how you can use it to help your business in any economy.
What are some of the key benefits of credit insurance?
Credit insurance protects your profit-and-loss (P&L) statements and balance sheets by transferring payment risk to your insurers. It facilitates access to financing and helps you obtain improved terms from the banking market. The banking market is changing daily, and terms that you may have secured in the past are subject to change overnight. Further, credit insurance provides access to complementary debtor evaluation tools and expertise that underpin the credit decision.
A good credit insurance policy will enhance your credit management and help you comply with corporate governance best practices. You’ll be able to increase sales through secure credit lines on your customer base and increase export revenue through competitive, but secure, credit terms.
Both small and medium-sized organizations benefit from the protection and the outsourced credit evaluation provided by credit insurance. There has also been significant growth in the purchase of credit insurance by multinational organizations. These companies are looking to protect against large credit exposures that seem to be appearing overnight, irrespective of their country of origin, while achieving a commonality of credit management across their national operations. That makes credit insurance very attractive to them.
How does credit insurance help the bottom line?
Credit insurance can be used to enhance your receivables portfolio, which, in turn, allows competitive financing, improved ‘cost of funds’ and the ability to negotiate advance rates. This can apply to the full spectrum of facilities, from invoice discounting to off-balance-sheet securitization.
In addition, credit insurers have developed sophisticated data analysis tools that can provide you with the latest intelligence on your company and on the economy. They can provide a credit evaluation service, which will help you decide on the best level of credit for each of your customers, or provide you the ability to set your own insured credit limits.
How does credit insurance work?
A typical policy covers a total debtor portfolio or a selection of key customers. To activate the coverage, you establish credit lines on your customers, either internally or via the credit insurer’s in-house resources. Premiums can be charged on the credit line, on outstanding receivables, or on turnover (sales). Claims are paid at 85 to 100 percent of the bad debt after an agreed-upon grace/waiting period (e.g. 30 days for insolvency).
Why do companies need credit insurance?
There are a number of scenarios in which companies buy credit insurance. Some buy it to reduce or transfer the risk of nonpayment from their balance sheets to an insurance company. Others buy it to increase their ability to borrow against receivables, or to be more competitive by offering longer terms of sale or increased credit lines to their buyers. Another group may buy it to allow the company to safely enter new markets and to be able to safely offer terms to new buyers.
Has the need for credit insurance increased as international business has increased?
Absolutely. Credit insurance is very common in Europe. Because of this, European companies are more willing to offer payment terms when they export. Companies in the United States have now found that they, too, have to offer similar terms to be competitive. Many companies have turned to credit insurance as a way of mitigating the risk of offering credit terms when they export.
Another benefit is that the leading credit insurers have extensive databases of financial information that their insureds can tap into to help them make more informed credit decisions in foreign markets.
Do all companies need credit insurance?
Any company can suddenly find itself having financial difficulties, and there aren’t very many buyers of unquestionable credit quality remaining. Unless a company derives all of its revenue from sales to the U.S. government, there is a reason to explore how credit insurance may enhance your receivables against a sudden financial meltdown.
Over the past couple of years, credit insurance has become a lot less expensive than it was in the past. Even though the market is beginning to change, rates are still relatively low, and quality coverage and capacity are available.
Mike Wells literally grew up in his business, Wells’ Dairy Inc. He started as a route driver while working his way through college, and today, he is the company’s president and CEO.
The company is the largest family-owned and managed dairy processor in the United States and its well-known Blue Bunny products are distributed across the nation in supermarkets, foodservice establishments, convenience stores and neighborhood ice cream trucks.
Through perseverance, Blue Bunny has become the No. 3 brand in the country, but despite its success, challenges remain. The company competes against two of the biggest food companies in the world, Nestlé and Unilever.
Wells has charted a course to be the No. 1 or No. 2 brand in every channel and with every customer by 2020. He has made significant investments in the company’s processes, innovation, advertising and people. Despite being much smaller, Wells says the entrepreneurial spirit of the company offers several advantages.
First, the company culture and values set it apart. By hiring top people and letting them do what they do best, the company has a culture that allows it to compete with much larger competitors. Second is a focus on core business products. In early 2008, Wells’ Dairy shed two noncore businesses to focus solely on ice cream products. The third advantage is the company’s customer orientation. The company seeks to grow and serve its customers distinctly and to be their preferred ice cream supplier in each of the channels it competes retail, foodservice and impulse.
Under his leadership, the company set sales records, improved its financial condition and reduced debt by nearly 40 percent. His confidence in the company showed when he purchased additional shares, allowing his family to become the majority owner of the company.
How to reach: Wells’ Dairy Inc., (712) 546-4000 or www.bluebunny.com
Twenty-seven years ago, Watco Companies Inc. got its start at the kitchen table in the home of Dick and Kaye Lynne Webb. Today, Rick Webb continues the family legacy as CEO of what has become a national railroad transportation provider that spans 26 states and employs nearly 2,000 people.
The company’s long-term strategy and corporate culture is centered around its customers, and Webb and his team strive to satisfy all of their requirements to make them completely happy. At the same time, he also strives to grow revenue and maximize profits.
In addition to growing the business and meeting customer needs, Webb has also strived to improve safety in the company. He and his team initiated an improved safety program in 2003 with a goal of reducing accidents by 50 percent each year. Since rolling out the program, Watco has achieved this goal, which not only comes with the obvious benefits of increased safety for the work force, but it also has meant a safety record better than the industry average and lowered costs and risks associated with operating the business. Additionally, they’ve improved the quality and reliability of their services by achieving this safety goal.
Looking toward the future, Webb is focused on internal growth by continuously improving efficiencies and investing in safety and maintenance of the tracks and equipment. He’s also interested in achieving growth through completing selective acquisitions. He has completed 37 acquisitions since the company’s inception.
Since taking over as the CEO in 1998, Watco’s revenue has grown significantly, resulting in a compound annual growth rate of 18 percent. This kind of growth is attributed directly to Webb and his team’s intense focus on effectively implementing their guiding principles of improving customer satisfaction, improving profitability and return on assets, and reaching their long-term vision.
How to reach: Watco Companies Inc., (620) 231-2230 or www.watcocompanies.com
The Weekends Only Furniture Outlet that you see today isn’t the same one that CEO Thomas E. Phillips Jr. saw when he did a thorough assessment of the company in 2005.
In the six years leading up to 2004, the company had grown from three employees to 300 through several store openings, but in 2004, the business had an unprecedented loss. He found the company in financial turmoil and he was also at personal financial risk. So Phillips assessed the structural deficiencies that had been masked by the company’s earlier growth. He found troubling symptoms unconscious leadership, lack of purpose, silos that prevented teaming, widespread lack of engagement, negativity and fear, and a pervasive lack of trust.
He knew he had to act. He knew before he could change the business that he had to change its culture, and to change the culture, you have to change its leadership. He brought in an outside consulting firm to conduct structured assessments on himself and his leadership team and a 360-degree evaluation to identify blind spots. As a result of their findings, he recast his leadership team and began developing himself and the vision for the company.
He created and rolled out the mission and values that weave through everything in the company today. This new culture has resulted in growth every year, totaling 47 percent since 2004. Under Phillips’ leadership, Weekends Only has become an agent for human growth, formation and happiness and a sustainable organization of value. Today, the company, which specializes in discount pricing and is only open on Fridays, Saturdays and Sundays, is recognized as the No. 1 home furnishings retailer in the market, and his goal is to become a top 50 home furnishings retailer in the nation.
How to reach: Weekends Only Furniture Outlet, (314) 447-1500 or www.weekendsonly.com
Since 1999, Jeffrey Stroburg has served as CEO of one of the nation’s largest farmer-owned cooperatives, West Central, the predecessor to Renewable Energy Group.
Stroburg’s strength lies with his innate curiosity and ability to frame issues in group brainstorming sessions that foster massive idea trades. He surrounds himself with good people and asks for their input.
His thinking manifested itself in the form of Renewable Energy Group. With a growing biodiesel business, the West Central leader was faced with creating a strategic model for a business without a proven concept in an unproven industry. Based on market data and internal expertise, West Central formed the nation’s largest fully integrated biodiesel company, REG, where Stroburg serves as chairman and CEO.
Key to the REG business model is leveraging internal core competencies while building external partnerships. Under Stroburg’s leadership, the company has designed and constructed five commercial scale multiple feedstock biodiesel plants. It also completed $100 million in private equity financing.
Stroburg’s vision for the company is directionally correct for the macro trends of the agriculture and energy industries. He fosters innovation through the creation of additional green-collar jobs, putting more money back in the pockets of American farmers and adding value for the company’s shareholders through continued utilization of core and partner competencies.
His business model also emphasizes environmental responsibility. Throughout his tenure, the biodiesel industry has improved its energy balance ratio from 1-to-3.5 to 1-to-5. REG’s technology efficiency innovations continue to improve the industry’s overall sustainability model.
How to reach: Renewable Energy Group, (515) 239-8000 or www.regfuel.com
When Richard M. Vohs took the helm of Iowa Network Services Inc. as president and CEO in 2002, the group of rural independent telephone companies was feeling its first financial strain. The wireless communications portion of the business a statewide network that connects customers to a central telecommunications hub was quickly evolving. But Vohs’ steadfast vision steered INS toward profit, paving the way for a company that is debt-free, financially sound and growing.
Vohs came to the company in 1993 with a background in both communications as a TV news director and government as a press secretary for the Iowa governor. As he advanced to the top seat, his quiet personality and egalitarian leadership style built up his staff’s trust.
He inspires employees and customers alike to keep striving for the next level of service. His business plan, which is tweaked every two years with a constant focus on the future, forces that forward thinking. He is always preparing for what the customer will need in five to 10 years, not just right now. For example, INS is currently positioned to provide 10-gigabit Ethernet services, but Vohs is looking ahead to secure 40- and eventually 100-gigE connections.
Vohs’ vision for the future, paired with a healthy balance sheet, allows the company to invest in innovative technologies and progressive business plans for the next generation of communication services. Judging by the growth in number of services provided and types of customers served, that’s been an effective strategy.
Meanwhile, Vohs supports the future of Iowa communities with Ripple Effect, a portfolio of financial and technical assistance programs for business and community development. His program recently financed a new grocery store and MRI equipment for a hospital and helped plan a youth sports complex and a community center.
How to reach: Iowa Network Services Inc., (515) 830-0110 or www.IowaNetworkServices.com