The power of optimism for Bert Jacobs and The Life is good Co.

Bert Jacobs, Chief Executive Optimist, The Life is good Co.

The Life is good Co.

Twenty years ago, Bert Jacobs and his younger brother, John, were looking for ways they could avoid getting typical jobs. Jacobs and his brother never agreed with the standard path for someone coming out of college. In fact, at that time, Jacobs was delivering pizzas and teaching people how to ski to earn a living. The brothers were looking for a unique path to live life how they wanted to live it.

“We wondered if we could create something that fit us better,” Bert Jacobs says.

That fit was The Life is good Co., an apparel and accessories company that spreads the power of optimism in its products and through its nonprofit organization, The Life is Good Playmakers.

Fast-forward to today and Life is good has 260 employees and saw 2012 revenue north of $100 million. Not bad for two brothers who wanted to maintain the fun in their lives.

Jacobs serves as CEO, or chief executive optimist, while his brother John serves as chief creative optimist. The two started their company 19 years ago aided by a drawing of a smiling character named Jake, who has become more than just a logo on the T-shirts but a symbol of optimism and the driving force behind the company and its inspiring message.

“Jake is our hero here at Life is good, and we like to say that Jake has superpowers,” Jacobs says. “Those superpowers guide our decisions.”

Simplicity, gratitude and humor are just a few of the 10 superpowers in total that help shape how the company does business. In recent years, the Jacobs brothers have had to do some self-evaluation as leaders and plan more strategically to understand where to go next with their company and its message.

“We’re 19 years in business and we’re really less about being a clothing company and more about the clothing being a vehicle for an important message,” Jacobs says.

Here’s how Jacobs has overcome the growing pains of leading a small private company into a larger corporation.

Find your direction

Since early in Life is good’s existence, the company’s inspirational message has been both a strength and a challenge for Bert and John Jacobs.

“Our message is so clean and simple that it applies to a tremendous array of different things,” Jacobs says. “So we have a lot of choices, which is a great place to be for a business, but it can also keep you up at night thinking about what we should do and shouldn’t do.”

Jacobs remembers one instance when the company was just above $1 million and he got a call from a large liquor company wanting to purchase more than $6 million worth of T-shirts from Life is good.

“We could have had 600 percent growth, and it was really, really tempting, but it really didn’t have anything to do with the reason why we liked the brand, started the brand or the vision of the brand,” he says.

“There has always been that pressure, and when you’re given an opportunity to go and hit the gas, it’s real tempting to do it.”

That call was the late ’90s, but in recent years, Jacobs says it’s too dissimilar.

“There are always people bringing ideas and opportunities, and I think we have to look and say, ‘How do those opportunities line up with our mission? How do they line up with our vision and with what we’re trying to do with our lives?’” he says.

Knowing what move to make next is one of the biggest challenges in any business. The way to attack that challenge and consider it an asset is to know who you are and act like it.

“That’s how we define branding internally at Life is good,” he says. “The mission of our company is simple — to spread the power of optimism. If we’re going to make a business decision that drives revenue, that’s great. But if it drives revenue and it doesn’t spread the power of optimism, it’s not so great.”

These business decisions come back to the company’s inspirational leader — Jake and his superpowers.

“These superpowers have to start showing up in the deals we do,” Jacobs says. “A big driver of these decisions is knowing our brand. We had good gut instincts back in the early days. Today, we can really line it up against criteria, and it’s pretty easy to take a look and see whether it’s a fit or not.”

Decisions regarding company direction take a great deal of focus. You must consider all that is at stake and who will be impacted by the decisions.

“You need to get away from the details of the business and ask what you want to do with your life,” Jacobs says. “If someone is trying to make a decision about their business and they’re not looking at how that’s going to serve their life, then they’re not going to make the right decision, in my opinion.”

Once you answer that, you have to look at who the stakeholders are of the business and what they want to do.

“You have to start with the highest priorities and who owns that organization and what are they trying to do and where do they want it to be,” he says. “A big part of that is including your customer base in those stakeholders, because a business can’t continue, it can’t thrive, and it can’t grow or do new things without your customers. Then make a decision based on that.”

Regardless of what decision you ultimately make, you have to ensure that you go through a process to understand why you’re making that decision.

“There have been times with this business that we didn’t go through that process, and those are the times that it stings you,” Jacobs says. “We’re lucky that none of those times we did things that sank the ship and we can still live our dream. But if you don’t watch those things, you can lose your dream.”

Enable autonomy

Just as understanding the company’s direction in recent years has been a challenge, so too has having to let go of some of the leadership responsibility both Jacobs and his brother have had in the past.

“Like many small businesses — the people who started the business play a very critical role,” Bert Jacobs says. “You can sort of kid yourself at some point that nobody can do something better than you can.”

The Jacobs brothers began reading about the struggles that companies go through and the mistakes that leaders make. One thing they saw over and over was that leaders have a tendency to place blame on others for issues in the company, but they’re afraid to have a self-evaluation.

“That was a big step for us,” Bert Jacobs says. “What we did was we created a task force at Life is good and we asked them to critique my brother and I and our other four partners. It was sobering. They were really honest and really candid. There were many areas where we weren’t doing a great job.

“The task force and the criticisms forced us to put some structure in place to reorganize the whole company and align on all our major strategies.”

Going through that evaluation opened doors and enabled autonomy to Life is good and its top management and general managers of its different business units.

“When we clearly paint the vision of where we want to go and we get out of the way, they’re not as good as us, they’re better,” Jacobs says. “That decision has been a real revelation and a breakthrough that a lot of small business owners sometimes never make or make too late.”

For Jacobs, realizing that taking an extra day skiing up in Maine isn’t a bad thing every once in a while has helped him and the business grow.

“The business might be better off without me on a given day,” he says. “Maybe by being around we can get in the way of things. Instead, if we put people in place and we trust the job that they can do, then unexpected things can happen.

“I can point to spots through the years where we probably could have grown stronger, faster and smarter if we did a little less. When something is your baby, you hold it white-knuckled sometimes, and I think we have gotten over that and we’re enabling more things to start happening.” ●

How to reach: The Life is good Co., (617) 266-4160 or www.lifeisgood.com

How investing in your accountant can deliver big returns

Accountants can do much more than prepare your taxes. Stephen W. Christian, managing director at Kreischer Miller, offers some ways to work with your accountant to increase profits and grow your business.

Q: Can your accountant add value and help you increase your profitability?

A. Do you consider your accounting fees to be overhead or an investment? One stereotype of an accountant — bean counter, scorekeeper, tax preparer — deserves its connection with minimal value overhead. But the right accountant takes the historical numbers and information available and helps you navigate a path to increased profitability and a return on your investment.

Accounting firms add value in many ways, but one that C-suite executives are reaping the most benefit from revolves around determining and accessing the right information with which to make timely, informed decisions. Think of all the information embedded in a company’s systems — production statistics, time and productivity information, supplier and customer data, margin analyses, etc. Your accounting firm can assist you in harnessing it.

First, determine the information that would put you in the best position to make decisions and monitor activities. What are the key performance indicators? Your accountant can assist you in determining the appropriate indicators. You can then develop the type of dashboard report you would like to review.

Your accounting and technology teams can assist in automatically populating the dashboard reports. You will be able to review critical information on a daily, weekly or monthly basis from any smartphone, tablet or computer. Stop wasting time with the incredible amount of useless information available to all of us. Work with your accountant to focus on utilizing only the relevant data, putting you on a path toward timely, better decisions that lead to improved profitability.

Stephen W. Christian is a managing director at Kreischer Miller. Reach him at (215) 441-4600 or [email protected]

Joe Nettemeyer diversified Valin Corp.’s business one acquisition at a time

Joe Nettemeyer, CEO, Valin Corp.

Joe Nettemeyer, CEO, Valin Corp.

It could be a deal. It could be a business strategy. It could even be a house. Whatever the project, Joe Nettemeyer is all about making it bigger, better and more successful.

“I had a boss tell me once that I was not a person that he would put into a business to sustain it,” says Nettemeyer, CEO of Valin Corp. “He’d always put me into something that he wanted to build because I couldn’t help but start trying to re-engineer anything I wanted to get my hands on. Building something is an ongoing challenge, but the results give you a huge amount of satisfaction.”

A builder was exactly what Valin Corp. needed when Nettemeyer joined the industrial solutions business in 2001. Despite years of great success in the semiconductor capital equipment business, Valin has been a fast casualty of the computer-chip industry downturn. With a whopping 90 percent of its revenue coming from chip manufacturing, the company’s revenue plummeted by two-thirds in six months.

“Everything crashed, equipment owners crashed, and we went from being a $75 million business to a $25 million business in about 120 days,” Nettemeyer says. “We didn’t lose market share; it’s just that the slides of the market opportunity dramatically contracted.”

As Valin’s new CEO, Nettemeyer realized the 38-year-old chip manufacturer had two options: Continue in the same direction and fall apart or rebuild as a much more diverse business. Here’s how he transformed the floundering company into one of the nation’s fastest-growing businesses.

 

Shake off complacency

With such a large percentage of Valin’s income tied to shrinking revenue streams, Nettemeyer looked for ways to create new sources of income — and quickly. Acquisitions would allow the company to efficiently diversify its portfolio and grow new business lines.

“When I came in, I realized that we had such a great dependency on too few accounts,” Nettemeyer says. “It was such a huge risk. We had to move into acquisitions. So right in the midst of that turmoil I went out and started borrowing money and buying businesses.”

Not everyone was as excited as Nettemeyer about diversification.

“Experimentation brings rewards and risks that make people uncomfortable,” Nettemeyer says.

“It was challenging for people because they were in a comfort zone. They’d done extraordinarily well for 20 years doing what they were doing, and we were pushing them outside of it.”

In the past, Valin focused on small diameter process management, working with quarter-inch or half-inch tubing. Suddenly, the company was working with up to 60-inch pipe.

Recognizing that he was asking people to make some big changes, Nettemeyer made sure that he and the leadership team were transparent and thorough when they laid out the acquisition strategy to employees.

“I walked the management team through a plan, and we talked about how we could integrate these different technologies and provide solutions versus just selling parts and pieces,” he says.

“There was a lot of communication. I selected all the individuals that I felt were key leaders and we had monthly leadership meetings. We reviewed where we were at, and we had an open book approach to financials. We were measuring the initiatives that we were undertaking. Through that 24-month real crucial period, we were giving monthly feedback.”

Employees appreciated the fact that Nettemeyer didn’t sugarcoat the changes.

“I wasn’t going to pretend that this would all pass,” he says. “There was a core group that really came together and embraced what we had to do.”

At that point, employees who still wanted to take a “wait and see” approach to the market — including two members of Nettemeyer’s leadership team — were asked to go their separate ways.

“I think it’s my responsibility to the company to leave it a better company than it was when I came here,” he says. “That means we’ve got to get out in front. That gives you some heartache and pain. It gives you sleepless nights and scary moments. You have to celebrate the successes, but you also have to say, ‘That was really a dumb idea — let’s stop it.’

“I had to replace some of the management team because they wanted to sit and wait. They thought that the semiconductor industry was going to continue what it always did — it was only in a short-term contraction. Well, that contraction lasted for three years.”

 

Systemize integration

Soon after making Valin’s first acquisition in October 2001, Nettemeyer began buying businesses and product streams that were within the company’s technical bandwidth and that could provide it a competitive advantage. Some acquisitions were a natural expansion of things that the company already did, such as safety devices. Others helped flesh out Valin’s expertise to transform it from a parts provider into a resource for customers.

“We have to find new ways to do things because if you’re going to stand pat, you’re going to get slowly sliced up in the marketplace,” Nettemeyer says. “The biggest struggle we face is the fight against the complacency you get with maintaining the status quo.

“Every year in our planning process, we say, ‘Is this the way that people are going to want to do business with us 10 years from now?’ When you ask that question, everybody says no, and then the next question is, ‘Well, what should we be doing about it?’”

Valin has completed 28 acquisitions since Nettemeyer joined the company 12 years ago, building on technology, and moving more aggressively into light manufacturing, medical devices and service lines. Instead of chip manufacturing, Valin’s biggest markets are now energy, oil and gas. The diversification strategy has allowed the San Jose, Calif.-based company to more than double its size and value over the last five years.

One of the reasons that Valin has been able to integrate so many new businesses so effectively is by having a clearly defined integration process that provides ongoing support.

“The smallest business we’ve bought had $500,000 in revenue,” Nettemeyer says. “The largest we’ve bought had $25 million in revenue. I’d say we spend most of our time buying businesses in the $3 million to $20 million range. We just have to make sure that we take them on at a pace that’s digestible.”

Valin’s integration process goes like this: After purchasing a business, the company converts the business’s IT systems in one weekend. Next, Nettemeyer brings in a team for one week to teach employees how to navigate and enter information into its ERP system. After the tech teams leave, an expert is assigned to stay and work with the business over the following months.

“You teach people, but they forget how to do that and how to make connections,” Nettemeyer says. “We have an embedded expert there for 60 days because we find that’s about how long it takes to get people comfortable with it.

“Then after that we have a call desk that they can call at any time, and they continue to have technical support. It’s getting them integrated into our system quickly that gives us good control over our assets, inventory receivables and cash flow. We’re excellent at doing that.”

 

Invest in education

While contracting revenue forced Valin to shrink its employee base to 45 employees in 2001, acquisitions enabled it to transition into a variety of new markets. By 2011, chip manufacturing — previously the company’s bread and butter — accounted for just 25 percent of the company’s $150 million revenue. This growth also meant Nettemeyer could begin hiring again, adding employees to expand the company’s businesses across the country.

However, there were some challenges stemming from Valin’s diverse and growing footprint.

On one hand, Nettemeyer and his team — like many manufacturing companies in the U.S. — have had to deal with a dwindling talent pool, specifically, the lack of highly qualified engineering talent in the market. Taking advantage of new business opportunities requires a well-trained work force with the sophisticated skills.

To attract and retain talented people, Nettemeyer has worked to create fellowships with IBM, Texas A&M School of Engineering and The Ohio State University to open opportunities for employees at Valin. Each year, for example, the company sends two promising managers to participate in the Texas A&M School of Engineering master’s program in industrial distribution so that they can learn critical skills to drive the business forward.

“Part of our educational effort is we’re monetizing education and teaching engineers how they can run their facilities more efficiently and prevent downtimes — a huge expense,” Nettemeyer says. “They are more likely to be thought leaders, and you get thought leadership through education.”

Investing in education, both formal and informal, also helps you provide a framework that enables employees to come together and be successful. Having employees aligned behind common goals and a common vision has been critical in a culture that gives Valin a competitive advantage.

“If I have five presenters going around trying to teach something, they are all going to teach it differently,” Nettemeyer says. “We wanted to get uniformity in the message. We wanted to make sure that we’re highlighting the things that we think are important.

“If you don’t do that, people on their own will spend their time managing their own basket and not managing to the goals and objectives that we have to achieve.”

Today, Nettemeyer and his leadership team spend much more time visiting with managers to talk about their priorities and responsibilities as owners. Being a 100 percent ESOP business, it’s important for Valin to have a consistent message about what ownership is and the responsibilities owner have to suppliers, shareholders and customers. Three years ago, the company also hired a doctorate in education employee to develop online training modules that give Valin’s 240 employees in nine states and 15 locations a common process and common approach to management and establishing priorities.

“The education component is critically important for us,” Nettemeyer says. “You buy different companies, and they all have their different approach. Everybody thinks that their way is better. What we have to strive for is being consistent. Being consistent means that people have to have a repeatable positive experience when they interact with our company, and we see training as a huge part of that.” ●

How to reach: Valin Corp., (800) 774-5630 or
www.valin.com

 

The Nettemeyer File

Joe Nettemeyer
CEO

Valin Corp.

 

Born: St. Louis

Education: St. Louis University

What is one part of your daily routine that you wouldn’t change?

I get up at 6 a.m. every morning and read for about an hour and a half, usually something that pertains to work. I have a responsibility to the organization as CEO to stay current with contemporary business. Most of the material I read is focused on economics, insights on how to make better decisions and improve the business or how to sustain our business for the long term.

 

What do you do to regroup on a tough day?

After a tough day, I like to go home and have dinner with wife of 36 years, talk about our family — four children and three grandchildren — because they are the cornerstone of my life.

 

What is the toughest business decision you made recently?

I’m making tough business decisions every day, whether it’s the decision to make an acquisition or walk away from an opportunity. These decisions are the challenge of a healthy struggle.  If you think it’s easy, you are missing something.

 

What do you like most about your job?

We’re pushing the envelope. Organizationally, we’ve committed ourselves to being students of our industry … I find that intellectual stimulation to be really gratifying.
How do you find good people?

I remember Ross Perot when he wrote his book, he said, ‘Eagles don’t flock together. You have to go find them one at a time.’ You have to find the people, and you’ve got to have people that have passion and commitment and want to accomplish bigger things. They want to be part of something that they have major accomplishments … you have to be looking all the time for people with that profile.

Few layers and plenty of freedom give the managers at McKinley Inc. the spunk to grow

Albert M. Berriz, CEO, McKinley Inc.

Albert M. Berriz, CEO, McKinley Inc.

Twenty years ago, McKinley Inc. was a company with 450 employees. Ten years ago, the company, which specializes in real estate investment and management, had a single operating platform for all of its businesses.

That was then, this is now.

Today, Ann Arbor-based McKinley has more than 1,400 employees and six different divisions contributing to its $273 million annual revenue figure.

It’s a long way of saying that growth has been a fact of life for CEO Albert M. Berriz. That’s a good problem to have, but it still comes with a series of challenges that must be met and overcome if Berriz is to have a financially and culturally healthy company on his hands for years to come.

“There are a couple of basic disciplines that we are very methodical about,” Berriz says. “One is we maintain a very flat organization. I believe that the distance from where I am sitting to where our customers are sitting is really no more than two heartbeats. I have six divisional CEOs who report to me, and they are flat with the people in the field, who are our customers.

“The second thing is, the six individuals who run each of the businesses have a lot of autonomy. They really get a lot of freedom to run their businesses as their own.”

For Berriz, managing growth is about managing the distance between people. Though he oversees a company with assets in 25 states, he wants as few levels and geographical barriers as possible to exist between management and field employees, between management and customers and between peer-level employees in the field.

But to maintain that type of connectivity, Berriz has needed to constantly work on strengthening his company’s cultural values and refining his communication strategy.

“Anything we do is really not top-down; it’s really integrated throughout the organization and is customer-driven,” Berriz says. “Everything we do needs to be driven by our responsiveness to our customers.”

Promote your core values

Though Berriz gives his division heads a high level of autonomy regarding how they manage, he still requires them to hire, make decisions and lead based on McKinley’s core values and core purpose, which is posted on the company’s website: “To enrich the quality of life in our communities.”

Berriz wants his executives to lead with their own leadership styles, but he has learned that a company will not be able to grow and adapt effectively without every employee’s compass arrow pointing in a common direction. That fact only becomes more critical as your company continues to expand and add people.

“While I’ve basically given them liberty to run their businesses, and I’m not a micromanager, we do still have a commonality regarding what the core values are and what the core purpose is,” Berriz says. “Even though each member of my team might be hiring differently, their standards are the same and the core values that they’re hiring for are the same.

“That is how you continually promote your core values throughout the organization. Even though we’ve grown to 1,400 people, when we do employee surveys, it’s not uncommon for 90 percent of our employees to have a full understanding of what our core values and core purpose are.”

When McKinley’s management talks about those values to the company’s employees, they use individual examples whenever possible. Berriz says if you can put a face on the behavior you want emulated, it has a much better chance of taking root and becoming something that your company embraces as it grows.

“It has to be something that is done throughout the organization, as opposed to top-down,” Berriz says. “If you look at our core values and the things that signify our core values, we helped to reinforce them by talking about individual people in the organization. We didn’t just write it on the wall. We actually took examples of great people in the organization and used those examples to help fashion our values.

“Say we have an employee named Jeff, and we want to have Jeff as our positive example. We ask what makes Jeff a great person in the organization. That is how we got our core values. We didn’t do it backwards, just by coming up with things and writing them on the wall. You take a look at your seasoned people in the field, people who are successful and embody certain positive characteristics, and say ‘That is how we want our people to be.’”

Hire with a purpose

If your culture is both formed and driven by your people, you need to hire managers and employees who embody the traits and principles you want to emphasize. Technical skills can be taught, but values, ethics, adaptability and a willingness to put the customer first are, in most cases, a product of personality before training.

Identifying and hiring the best possible management team members is a crucial first step. If they are on board with your cultural principles, they’ll hire like-minded people as part of their teams, and those people can, in turn, attract more of the same — a factor that can work to your advantage in a big way if you are eyeing a period of aggressive growth.

“Great people attract great people, and that’s huge, because you can’t have an organization like ours with mediocre people,” Berriz says. “And once you have great people, they expect to retain the great people they’ve hired.

“I think one of the biggest reasons people leave or stay with an organization is their boss. The six CEOs I have serving under me all have very high standards, so they serve as the litmus test. They are going to be the ones who expel mediocre people and attract great people.”

Berriz says you should never forget that any given person’s impression of the company, its mission, its values, its growth plans, and his or her relevance to accomplishing it all is predicated largely on the boss-employee relationship. It’s why each person at every level of your organization needs to strive to embody and lead by your company’s values.

“Associates can know the name of a company, they may understand what a company does, they may know their job,” Berriz says. “But at the end of the day, the real relationship is with their boss.

“If it’s a sour one, their view of the company and what the company does will be sour. If it’s a good relationship, their view of the company is a good one. That’s why people stay with or leave a company because of their boss. It’s rarely because of other issues.”

Berriz takes that philosophy a step further, trying to promote a positive relationship between upper management and all McKinley’s employees in the field. He sets the tone himself by setting up multiple channels for communication and dialogue focused on the company’s present and future growth plans.

“There is a difference between autonomy and not having a common culture,” he says. “One of my most important responsibilities is attracting and retaining great people, and I need to do that culturally — not just with my six CEOs, but I have to do it right down through the organization.”

Berriz describes himself as an “old-fashioned guy” when it comes to communication. He prefers in-person interaction whenever possible, but given the number of people McKinley employs and the size of the company’s geographical footprint, it’s impossible to maintain a consistent level of personal contact with every associate in every corner of the company.

Berriz has needed to find other ways to engage his people. One of the primary ways he’s attempted to bridge the gap is by embracing social media as a communication tool.

“For instance, if you go to my Facebook page now, you will see news about what is happening in the company,” Berriz says. “I’m making four or five posts today to Facebook, and my Facebook page is tied to our company website, as is Twitter. So if you are a team member and you want to stay in touch, you can go to my Facebook page. If I didn’t put that effort out there, if I didn’t utilize those social media platforms, I don’t think my communication would be as effective.”

Berriz has recognized that a large percentage of his workforce is composed of those who came of age in the era of the Internet. Younger employees have lived their entire professional lives in an environment that includes high connectivity through electronic media.

If you are going to connect the company’s purpose to younger workers and maintain a dialogue with them, you need to consider the value of Facebook, Twitter, blogs and other electronic media platforms in your communication strategy.

“A big portion of our population at McKinley is in the 18-to-35-year-old category,” he says. “That means social media and how we are communicating in real time can be very powerful in terms of developing and maintaining a common culture. I travel around, but there is no way that I can touch every person in the company through traveling. You have to make other efforts, otherwise you’ll be out of touch.”

How to reach: McKinley Inc., (734) 769-8520 or www.mckinley.com

The Berriz file

Albert M. Berriz, CEO, McKinley Inc.

History: I was born in Havana, Cuba. My family moved to the U.S. in 1959, when I was three years old, as a result of the revolution in Cuba. I grew up in Miami, where I graduated from the University of Miami with a degree in architecture and engineering. I later received an MBA from Northwestern University.

What divisions do your CEOs oversee?

We have five real estate divisions — two commercial and three residential — and one division that covers acquisitions, finance, partnerships and new ventures. Five of them are based out of the Ann Arbor office, but they are never here. They are always out in the field. We have one individual covering the Carolinas, Texas, Nevada and Arizona; we have one individual who does Florida, Michigan, Indiana, Illinois; and another one who has a third overlaid geographically.

For me, nowadays, it doesn’t really matter where they live. I have one CEO who works down in Florida and actually keeps an apartment down there, which is great because that person stays closer to our people and closer to our customers.

What are the keys to staying in touch with your direct reports?

It is all personal. I am on the phone with a few of them every day, or talking in person once every couple of weeks. I am very connected with those people. I am not a micromanager, it is not my style, but we have an understanding and expectation of what the results need to be and what the culture needs to be. But after that, it is really up them to lead in their own style.

What are those conversations like?

It is very high-level. We have a very transparent organization, so you are either on or you’re off. We have dashboards here that are always available in real time, so I am always aware of good or bad developments. So the results part is easy, and the culture part is easy too, because I have a good sense of what is happening in the organization.

We have a well-run organization, so I am mostly focused on the future, where we are headed in 12 months, in five years and 10 years, as opposed to the problems of today. If there is an occasional problem today, I will deal with it, but to be candid, the problems are infrequent, so they are seldom an issue.

Takeaways

Define your company’s purpose.

Hire people to fit that purpose.

Utilize multiple avenues of communication.

Charlie Rosson identified where it hurts for his clients; now Woodruff-Sawyer delivers services more efficiently

Charlie Rosson, CEO, Woodruff-Sawyer & Co.

Charlie Rosson, CEO, Woodruff-Sawyer & Co.

As a 20-year veteran of the insurance industry, Charlie Rosson has seen his fair share of financial uncertainty, economic downturns and business struggles. So when he was promoted to CEO of Woodruff-Sawyer & Co. on Jan. 1, 2008, Rosson recognized rather quickly that his tenure was going to coincide with all three.

“Right from the start, like everybody, we were thrown a pretty difficult set of circumstances to deal with,” says Rosson, CEO of the San Francisco-based insurance services firm. “So many businesses were impacted in terms of their sales and access to capital and their business overall. The recession impacted our clients directly, and we were challenged to respond to that by coming up with more aggressive programs for them to quickly save them money and to help a lot of them through survival mode.”

Although clients were losing revenue and facing serious financial struggles of their own, the firm still needed to find ways to keep business profitable. But many clients could also no longer afford the firm’s services and products at the same rates or prices as in the past.

Like most professional service firms, Woodruff-Sawyer needed to find ways to keep clients’ businesses afloat but also avoid losing their business.

“Obviously, we had to become more efficient in the way that we do business, and we had to recognize in a lot of cases our clients weren’t willing or didn’t have the wherewithal to pay the same type of fees or commissions that they might have before the difficult time,” Rosson says.

“The way we would structure an insurance program before the financial crisis or before things got really difficult obviously wasn’t implacable anymore. So we had to kind of come to terms and help them with declining values and property, shrinking payrolls and overall downturn.”

Identify must-haves

Finding creative ways to deliver the same types of programs for clients more affordably wouldn’t be simple, especially because each client’s business was so different.

Rosson knew that the firm needed to work much more closely with clients to figure out win-win solutions.

“We had to negotiate greatly reduced premiums for them and come up with coverages that met their needs but were at a price point that they could afford,” he says.

So as Rosson and his team began talking with clients about their changing risks and opportunities, they also asked each client for a list of must-haves.

“We really had to dig in and find out what are the things our clients truly value and what things are sort of “nice to haves” that they didn’t value as much, and frankly, weren’t willing to pay for,” Rosson says.

“We’re fortunate that the clients we serve we have a great relationship with and normally have a pretty deep dialogue with them and attempt to fully understand their business,” he says. “So we can go in and talk about the services we deliver, how they’re delivered and how the team is structured, then drill into what things are important to them. Then we ask them honest questions about what things they can live without.”

Knowing your customer’s “deal breakers” can help you pinpoint the exact value that you add for them, allowing you to identify and recommend business solutions that are cost-effective but that still meet that customer’s needs.

“What clients are looking for is value, and in our case, it’s quality of advice,” Rosson says. “It’s how do we help our clients become more successful? And oftentimes when we partner up with them and really understand their business, we can help them execute a strategy that maybe they wouldn’t be able to execute without us.”

You may see opportunities to meet the future needs of your customers as trends emerge of where their businesses are moving and as new technologies come along. For example, the recession spurred the firm’s investment in technology to help address client issues.

“The current generation of buyers has already adopted technology as a core part of the way they do business, and that curve is only going to get steeper as newer generations come into the workforce and become leaders of companies,” Rosson says. “They’re going to expect that they can interact with service providers and professionals through some sort of technology medium. They’re not going to expect the traditional back and forth model that’s defined our industry for quite a while.”

Trim the excess

Once you identify your clients’ pain points and priorities, you can begin looking for ways to serve their needs more efficiently.

Rosson realized that although Woodruff-Sawyer continued to deliver valuable services and advice for clients, the firm could save time and cost by streamlining its approach — as could its clients.

“We had to get much more efficient in terms of the way we structured our teams, and we had to use technology in ways that we hadn’t before, in terms of delivering things through the Web that may have been done before either face-to-face or through some other lower-tech way to deliver service and advice,” he says. “So we are using technology in different ways, and we’re just more careful in terms of how we assign resources to client teams.”

Rosson restructured the company’s practice teams to put the focus on having the right people in the right roles, instead of just more bodies, to cut down on unnecessary costs.

“Don’t get swept away by how much revenue you think somebody can generate or how dazzling somebody is,” Rosson says. “Really do your homework and find out what that person is all about. Are they really a fit for the organization? Do they really have the client’s best interests at heart? Can they collaborate well with others? Those are really important things.”

Another way Rosson saw to improve efficiency was integrating technologies that could make communication more user-friendly for clients. Most of the technologies Woodruff-Sawyer has deployed are collaborative, meaning they enable communication between clients and associates outside of the traditional email and face-to-face meetings. In addition to saving its clients cost and time, many changes have streamlined the firm’s processes overall.

For example, the firm now issues all of its certificates online and deployed a portal called Passport, which permits document sharing and collaboration with clients over the Web to expedite projects.

Since seeing the positive impacts, Rosson has continued to pursue a direction that involves technological innovation. Recently, the firm launched an online portal for small businesses called, BizInsure, hired a chief information officer and has made investments in online business to ramp up its overall technology component.

“I’m absolutely convinced that emerging technology is going to have a disruptive impact on our business,” he says. “And I believe it’s going to be in a positive way, and we’ll be right there to capitalize on it. The way that we’re going to interact with our clients in the future is going to be different that our traditional model.”

Enable a responsive culture

Of course, it’s difficult to devise efficient and cost-effective solutions for clients if you don’t empower employees to be creative and test their ideas. Businesses that run their organizations with a heavy-handed, top-down leadership structure can easily stifle the kind of creative, engaged culture it takes to provide the most value to clients, Rosson says.

“To be a top-tier professional services firm, by definition, you want to have professionals — and you need to treat them that way,” he says. “The way to treat them that way is to respect what they do and be there if they need advice and guidance. You have to have a certain amount of structure, but listening and not being overly prescriptive or top-down in our approach has really paid dividends.”

Rosson avoids a command and control culture at Woodruff-Sawyer by furthering the firm’s corporate vision to remain an independent brokerage firm. Being a 100 percent ESOP firm gives the company a flexible infrastructure where top people feel empowered to make decisions and operate with more freedom, he says. With no shareholders, employees are able to focus on the client and do things for clients that might be difficult under a different leadership structure.

“We’re able to do things for clients in terms of being flexible and the people who are working with clients have a lot more authority to get things done for them, deploy resources and make decisions that our competitors who might have a different ownership system can’t,” Rosson says.

“Our independence is a key part of our competitive advantage and a big part of our culture.”

The independent structure has also helped the firm attract talented employees who value autonomy and the ability to be responsible to a client’s needs. And for companies that can’t do an ESOP, leadership comes into play even more. As a CEO it’s important to set the tone for your direct reports and other employees by showing that you trust their decision-making abilities.

“I truly believe that we have the best people in the industry,” Rosson says. “These are people who have arrived at a place professionally. They don’t need me to look over their shoulder or a leader to second-guess what they are doing.”

Rosson says in the future, the firm will continue to be prudent and watching the bottom line while making investments in technology and internal perpetuation to keep the firm independent. By successfully delivering insurance services in an efficient and user-friendly way for clients, the firm has not only retained clients, it’s also been extremely successful in adding new business.

“The vast majority of our growth is organic growth through just going out and telling our story,” Rosson says. “With a lot of our competitors, and the large ones, it can be very difficult or very expensive to access very sophisticated resources. What we do is deliver those same resources or the same level of advice — or even better — but do it in a way that’s less expensive and much more user-friendly.”

As a result, Woodruff-Sawyer has grown its revenue approximately 40 percent since 2007, generating approximately $70 million in revenue in 2011.

“Like so many businesses, the downturn forced us to work smarter and more efficiently and embrace technology,” Rosson says. “As the economy has slowly improved and our clients’ businesses has improved, we’ve found that we’ve been able to leverage our technology and we haven’t had to increase our costs at the same rate that maybe we would have. So we’re actually seeing that our business is healthier now, after the downturn, than it was before.”

How to reach: Woodruff-Sawyer & Co., (415) 391-2141 or www.wsandco.com

Takeaways

  • Ask customers where your business provides the most value.
  • Utilize technology to cut down on time and cost in customer interactions.
  • Empower employees to help clients by avoiding a top-down culture.

The Rosson File

Charlie Rosson
CEO
Woodruff-Sawyer & Co.

Born: San Jose, Calif.

Education: B.A. in history from UCLA

On growth: If you’ve got a very strong core business — I’m so bullish on the insurance business — you don’t need to take on too much debt or be overly grandiose in your expansion plans. Expansion and acquisitions all should be driven around acquiring people who fit into the organization, really bring something to the table and add to your organization rather than just executing a geographic growth strategy or putting pins in the map. All of your expansion should be for the right reasons, with the right people with client in mind, rather than trying to fill out (geographically) with different offices all over the place.

What is your favorite part of the business?

The best part of the business is getting out and meeting with clients and prospects. That’s why most of us got into this business and what really drives the passion for it. A lot of our relationships with clients go back 10, 15 and 30 years even. That’s the most fun part of it. I think it’s also really gratifying to successfully run the business and see the impact that you can have on employees’ lives.

What would you be doing if not for your current job?

Teaching English in Argentina

What one part of your daily routine would you never change?

Interacting with our clients and prospective clients

How do you regroup on a tough day?

I try to exercise every day.

What do you for fun?

Cooking, traveling, reading, coaching kids’ sports

 

How Jaime Vigil led Republic Steel through the recession to come out a stronger company

It looked to be another great year for Republic Steel.

Coming off its 2005 acquisition by Industrias CH, S.A de C.V. (ICH) — a fast-growing steel producer and processor based in Mexico City — the company had cleared up all its previous debt, the steel industry was flush with opportunity, and as the new

 Jaime Vigil, president and CEO,Republic Steel

Jaime Vigil, president and CEO, Republic Steel

was laser-focused on building a strong team and investing in best-in-class facilities to position the 125-year-old steelmaker for growth.

And that, of course, is when everything went south.

“After October 2008, the whole world changed for the industry,” says Vigil, who joined the Canton, Ohio-based steel company in 2005. “The recession threw us a curveball that we were not planning. I don’t think we were looking ahead. We had really relied on intelligence based just on market view.”

As the largest maker and supplier of special bar quality (SBQ) steel in North America, Republic produces steel for applications such as automotive and energy. It has been developing its steelmaking practices for more than a century. But even a company with annual sales of more than $1 billion wasn’t immune to the shock of the 2008 financial downturn.

Declining demand and struggling customers, who were urgently looking for ways to cut costs and scale back, hit the company hard. Almost overnight, Republic Steel saw its volume of business nosedive.

Streamline your structure

Not yet knowing the full scope of the downturn, Vigil knew that Republic Steel — like its customers — needed to cut costs to minimize the financial fallout. So the first step was to look for ways the company could streamline plant operations.

“At that point, the volume with the plants that we had had a lot of fixed costs,” Vigil says. “We were forced to shrink our footprint to be able to manage our costs and have a profitable business.”

Increasing efficiency without sacrificing quality can be tricky. You need to examine the profitability of every segment of operations thoroughly. First, identify the areas that have the most efficient costs, and second, identify where costs overlap. This process allows you to consolidate the most efficient operations and shut down equipment and functions that no longer make sense.

By making these changes, Republic Steel was able to shrink its footprint to that of a much smaller company in a short time period.

“That was a very different situation for us from 2005, but it was also a very good experience for us to try to model our business for the future,” Vigil says. “It allowed us to look at things in more detail and understand our business and our cost and the opportunities that we had to be more efficient.”

Taking cost out of operations not only allowed the company to produce SBQ steel more efficiently, but it also freed up resources, which Vigil reallocated to enhance the company’s quality, delivery and range of products in its SBQ steel business to provide more value to customers.

“We have to be right there with them making a product that suits their needs,” Vigil says. “Our No. 1 qualification or differentiation in the market is our ability to work with technicians of our customers to develop the products that fit their needs and then produce them consistently with a low cost and high quality and delivering them on time.”

When you’re not making a commodity, you need to be more focused on quality and continuously improving your products to stay competitive, Vigil says. The key to staying relevant was investing in the company’s strengths, such as its years of experience in the steel industry. The fact that the company’s Canton plant was the first-ever producer of SBQ steel provides it with a strong competitive advantage.

“Our brand has good recognition, and we continue to build on that by making our customers really comfortable in the long run that they have a true partner with Republic Steel, a company that knows what it wants and that can adapt to the changing market as needed,” Vigil says.

“With more than 125 years of know-how, you get a very good result. You can continuously provide the same quality that your customers are used to with more efficiency. It allows you first to be more competitive in the marketplace and maintain and improve your quality in the product.”

Since 2005, Republic Steel has reinvested close to $130 million in new equipment and new processes into its core Northeast Ohio facilities, which include plants in Canton, Lorain and Massillon, Ohio. In 2012, the company also announced that it would invest more than $87 million in a new electric arc furnace and equipment at the company’s Lorain, Ohio, steelmaking facility — a move that is adding approximately 450 employees.

The company chose the Lorain plant for the investment because of its close proximity to the existing customer base and to other Republic Steel facilities. Having a smaller physical footprint allows you to allocate resources to growing areas more easily to develop strong teams, while delivering a consistent experience for customers.

“We see a strengthening automotive industry as well as a lot of growth in the energy sector side through the gas horizontal drilling process,” Vigil says. “We see ourselves in a very good position to serve those markets in the long term.

“It gives us an opportunity to serve our customers with more product and a very solid footprint in the long run. Our customers have a supplier that has no debt and that is investing in its business. So we feel that our customers see us as a long-term partner, and they can stick with us for years to come.”

Look to your core

When your company is facing market volatility, past plans and strategies may get tossed out the window rather quickly. To ensure that Republic Steel didn’t lose sight of its identity in the chaos, Vigil used the company’s core values to guide the strategy — specifically two values passed down from its parent company, ICH.

The first was carrying a debt-free balance sheet.

“When we acquired the company in 2005, we inherited some debt from the previous administration,” Vigil says. “We worked very hard to pay it off with our own resources and some support from the parent company.”

Even when the company was losing volume during the recession, Vigil wasn’t willing to take on debt in favor of gaining more financial flexibility. In fact, he says borrowing money often results in the opposite outcome for companies by stifling their spending. Carrying zero debt allows you to make decisions without dealing with banks or lenders.

“Some companies have different opinions about debt, and in certain cases, it allows companies to be flexible and grow faster when an opportunity comes, but we still have that flexibility because having no debt makes us attractive to banks,” Vigil says.

“The recession has been the best proof of the strategy. We tested it through this downturn, and we were able to manage through the recession a lot better than some other companies who have big debt or a lot of interest to pay.”

As a result, the company has been debt-free since March 2006, operating as a true cash-flow company.

“It makes us a stronger company, and it allows us to keep reinvesting even in the downturn because the money that we generate is really for us and not to cover any debt obligations that we have,” Vigil says.

The second core value that helped guide the company through the recession was having a diversified mix of sales. Carrying a wide range of products makes the company a one-stop shop for many customers. So even in the downturn, Vigil continued to make investments to expand Republic Steel’s capabilities in emerging markets, such as natural gas and energy.

“The volatility in our customers’ industries continues to be something that we’re monitoring very closely,” Vigil says. “The economic situation worldwide, starting with Europe being so volatile, continues to have a big effect on our customers’ ability to project their levels of operations.

“Having a more diversified mix of sales allows us to not have all of our eggs in one basket and participate in different industries, and we’re able to better ride the cycles. We, as a company, believe that if we stick with those two values — remaining debt-free and continuing to have a diverse mix of sales — we can deal with the volatility in different markets.

“We’ve prepared our company to be better geared to react now than we were in 2008. Through these changing circumstances, we’ve created a more flexible company with the investments that we’re making, allowing us to grow our strength faster.” ●

How to reach: Republic Steel, (800) 232-7157 or www.republicsteel.com

Takeaways

1. Find ways to cut cost by shrinking your footprint.

2. Allocate resources to growth areas.

3. Guide your strategies with core values.

The Vigil file

Jaime Vigil
President and CEO
Republic Steel

Born: Mexico City

Education: Universidad Anahuac in Mexico City

What is one part of your daily routine that you wouldn’t change?

I like running every morning before going to work; it really makes a difference helping me start every day with great energy and a clear head ready for business.

Best piece of business advice:

I’ve benefited a lot from the experience that my team brings to my decision-making process. That saying that more heads are better than one — that does apply in practice. It’s particularly important in soft science to surround yourself with good members willing to openly give their take on problems so that together you come up with the best solutions.

What do you do for fun?

There is no better way for me to spend my time when I’m not at work than with my wife and kids. From training for a marathon with my wife, to being attacked with toy swords by my three and four year old boys … it’s the best time of my day!

 

Josh Harmsen – How private equity can support growth, not just provide liquidity

Josh Harmsen

Josh Harmsen, principal, Solis Capital Partners

I was recently having lunch with a private company CEO and the topic of private equity came up. When asked if he had ever considered seeking a private equity partner to fund and support his planned growth initiatives, his answer was expectedly, “No, we don’t want to sell the business yet. We want to focus on growing the business.”

While I can certainly appreciate his perspective, that opinion is consistent among many business owners and leaders. Namely, that private equity is primarily a liquidity mechanism, not a preferred tool to fund and support company growth. Moreover, many business leaders often see their growth plans as incompatible with private equity, which they associate with high leverage and limited financial flexibility.

This perspective of incompatibility was also on display during the recent presidential election. Private equity firms were broadly characterized as opportunistic value extractors, rather than enablers of company growth and job creation.

While the purpose of this article isn’t to defend private equity (there certainly are some firms worthy of this negative characterization), significant evidence exists to suggest that, in general, private-equity-backed companies experience proportionally greater growth. This is particularly true for small-to-medium-sized businesses.

Private capital a key to growth

According to studies performed by GrowthEconomy.org between 1995 and 2009, U.S. private-capital-backed business grew jobs by 81.5 percent and revenue by 132.8 percent, compared to 11.7 percent and 28.0 percent, respectively, for all other companies.

In California, over the same period, the story was even more favorable to private equity.  Private-capital-backed businesses grew jobs and revenues by 123.1 percent and 155.2 percent respectively, compared to 11.3 percent and 26.4 percent for all other California businesses.

While each situation is unique, there are many reasons why private-equity-backed companies experience greater growth.

Access to capital

With the continued tightness in the credit market for small-to-medium-sized businesses, private equity can be a source of capital to support growth initiatives.

Additionally, private equity firms often have preferred relationships with lenders, giving businesses more access to attractive and flexible debt financing where appropriate. With greater access to capital, companies can more quickly, nimbly and opportunistically implement growth initiatives.

Strategic guidance and ongoing operational support

A private equity partner can provide much-needed strategic and operational resources to support the company’s growth initiatives and ongoing operations. This often leads to more thorough and refined growth strategies, as well as more effective plan execution and implementation.

Private equity firms often have large networks of industry experts and experienced operators that they can bring to bear to support company growth and operations.

Increased capacity for acquisitions

Private-equity-backed companies are significantly more acquisitive than other private businesses. Acquisitions can be an attractive source of growth, allowing companies to increase their customer footprint, expand geographically, create greater scale and enhance capabilities in a relatively short time frame.

However, successfully identifying, executing and integrating acquisitions can be very difficult. Many business leaders don’t have the time or experience to effectively pursue acquisitions. Private equity firms generally have expertise executing acquisition strategies and can be valuable partners in supporting companies as they identify, negotiate, execute and integrate acquisitions.

Private equity can be a compatible and effective tool to support and achieve company growth — not simply a mechanism to achieve liquidity. While private equity is not appropriate in every situation, and not all private equity firms are growth-oriented, business owners and leaders should carefully consider a private equity partnership when evaluating their ongoing growth initiatives and funding options.

Josh Harmsen is a principal at Solis Capital Partners (www.soliscapital.com) a private equity firm in Newport Beach, Calif. Solis focuses on disciplined investment in lower middle-market companies. Harmsen was previously with Morgan Stanley & Co. and holds an MBA from Harvard Business School.

Joseph James Slawek – Four tips for planning a better leadership transition strategy

Joseph James Slawek, Founder, Chairman and CEO, FONA International

Joseph James Slawek, Founder, Chairman and CEO, FONA International

A healthy and growing organization proactively plans for succession and transition. It’s simply the nature of business. As my company recently celebrated 25 years, we turned our focus to purposeful succession. I wanted to share with you the key steps involved, the importance of planning and a few things I’ve learned along the way.

1) Get the next generation involved.

As your company grows and develops, it will become increasingly important to begin transitioning leadership to the next wave of leaders. This process will look different for each individual company. For me, it means moving away from our entrepreneurial leaders (generation one) to our professional, internationally focused leaders (generation two).

Be sure to constructively build on the strengths of each generation and tap into the energy, passion and vision of your current leaders to fuel the transition and create an even better future for your business.

2) Shift your board’s focus to policy.

When your board members focus on operations, they are participating in the day-to-day management of the organization. As you prepare for purposeful succession, the focus should shift to policy where they enact and enforce policies, which broadly govern the business. This move helps your organizational governance become more formal through the creation of an entity that protects your company’s health and well-being.

3) Select the next president and

his or her successor.

Your policy board has one critical succession responsibility: to choose the next president and his or her successor. It’s important to remember that the board’s succession responsibilities end with choosing the president. It is the new president, not the board, who has succession responsibility for the executive team.

4) If it’s a family business,

address the family estate plan.

This plan is critical to any successful generational transition but admittedly can be uncomfortable and awkward to deal with. Questions that need answers are akin to personal estate planning when the attorneys ask, “Who gets custody of your kids?” In family businesses, the first difficult question is, “Do we have a competent family member successor, and, if not, who gets custody of the business?”

Purposeful succession plans set the groundwork for the unplanned successions, which is important because once you have carefully laid out your plans, you may think, “What could go wrong?” But, the reality is whether due to illness, disability, death or any number of other scenarios, unplanned succession is a part of life.

When these challenging events happen, they create an extremely high level of emotion, distraction and added workload, in addition to leadership style changes. They also tend to cause anxiety in the organization’s employees, vendors and partners. As a result, in this “unplanned” scenario, these anxieties must be addressed directly and immediately by an already overburdened executive team.

With that in mind, let me leave you with this: The only difference between planned succession and unplanned succession is the amount of time you have to deal with the situation.

In the case of an emergency succession, communication with employees, vendors and partners begins immediately and must be completed within a couple of weeks. In a planned succession, the communication time is only slightly extended to a couple of months. The exact same emotions and distractions are present in both scenarios — the only difference is the level of intensity.

Joseph James Slawek is the founder, chairman and CEO of FONA International, a full-service flavor company serving some of the largest food, beverage, nutraceutical and pharmaceutical companies in the world. For more information, visit www.fona.com.

 

Dolev Rafaeli stayed on course to define the new, post-merger normal at PhotoMedex by sticking his neck out

Dolev Rafaeli, CEO, PhotoMedex Inc.

Dolev Rafaeli, CEO, PhotoMedex Inc.

It took three tries over the span of five years to make the merger of Radiancy and PhotoMedex a reality. So when the merger was finalized in 2011, Dolev Rafaeli was determined to make all aspects of it a success.

Rafaeli had been the CEO of Radiancy and was assuming the CEO’s position in the combined company — a manufacturer of medical treatments for skin conditions and other skin-related consumer products, which would carry the PhotoMedex Inc. name.

In terms of their history and DNA, the two companies had starkly different backgrounds. Radiancy, the larger of the two companies, was privately held, focused on consumer sales and had developed a presence in the international marketplace.

PhotoMedex was a public company, sold mostly to other businesses and was heavily focused on domestic sales.

From 30,000 feet, the companies were complementary parts, bringing different areas of strength to the table. The merger was a puzzle-piece fit. But at ground level, things were a little more complicated for Rafaeli and his management team.

“The biggest challenge, and the reason it took us five years to make it happen, was what you would call an HR challenge,” Rafaeli says. “Usually, when you look at mergers and acquisitions, everybody can understand the very objective analysis of numbers and the very subjective analysis of how things might look if we merge the two companies. The biggest challenge was, how do you get two teams engaged when at least part of the two teams thinks they don’t have a future in the company?”

Rafaeli had to combine two cultures from two different backgrounds, and once he had everybody on board, he had to set the stage for the company’s continued success or any momentum gained during the merger process would be lost.

Create alignment

In any large-scale change, alignment starts at the top. Nobody in the company will adopt the changes if he or she sees any type of negative or mixed reaction from those in charge. To that end, the management teams at Radiancy and PhotoMedex began the process of finding points of consensus nearly five years before the merger took place.

“We actually had known each other since 2007, so there wasn’t too much change in the transition for the management teams,” Rafaeli says. “We put together a project team that was running the two companies as if we were merged, about eight months before the merger happened. We were making decisions and considering things together, and we built our plan to make changes both before and after the merger.”

As the larger company, Radiancy had the majority of the resources that would be needed during the merger process, but since the combined company would be publicly traded and carry the PhotoMedex name, PhotoMedex served as the basic template by which the new company would be constructed. It was a matter, in many cases, of the combined leadership team creating operational alignment by building more efficiencies into the previously existing PhotoMedex processes.

“A lot of it happened before the merger was even consummated, so for example, we took apart all of the logistics philosophies in the old PhotoMedex but reassembled them based on the old PhotoMedex while using Radiancy’s resources,” Rafaeli says. “Since Radiancy was bigger, we had better costing to do things, resulting in a savings post-merger. We did the same thing with our insurance platforms, payment processing platforms, and with our PR and advertising companies.”

With an aligned leadership team creating aligned strategies, systems and processes, it became much easier for Rafaeli to bring the rest of the company’s workforce on board with the merger. An important first step was letting the company at-large know that no layoffs were planned as part of the merger.

“The scale and geographic diversity really required that nobody leave,” Rafaeli says. “We needed to keep all the finance teams that both companies had pre-merger. Each side had to learn what the other was doing and develop a way to combine the systems. We had to become SOX-compliant and handle a very coherent reporting system.”

In some areas of the company, the best solution was a combined one, implementing practices from both pre-merger companies. But in other areas, Rafaeli and his team decided to take an either/or approach to implementing best practices, aligning the company with one standard or the other.

“The operations team in both previous companies had two complementary sets of knowledge, and we had to merge the two of them in a way that took advantage of all the areas of strength,” Rafaeli says. “What happened was, we had the quality manager of the old PhotoMedex oversee the quality system of the combined company. The supply chain manager of Radiancy took over material supply for the whole company, because Radiancy was doing it more efficiently.”

It is crucial that you paint an accurate and complete picture of your vision for the post-merger company and that you do it early in the process. If you are going to create buy-in and subsequently create complete alignment throughout all levels of your organization, everyone has to know where they fit and what will be asked of them.

“We have very talented and experienced people, and we wanted all of them to stay and be engaged in the process of the merger and remain engaged post-merger,” Rafaeli says. “The important part there is keeping them engaged throughout the process of the merger.”

Announce your arrival

Even if you’re keeping the identity and product lines from both companies, as the relaunched PhotoMedex did, it won’t be business as usual for your customers. They’ll see a new company with a future in flux, which is why you need to connect with your customers and paint the same clear, accurate and candid picture that you did for your employees.

One of the ways Rafaeli and his team sought to announce the arrival of the new PhotoMedex and affirm the company’s identity to outsiders was through its marketing efforts.

“It was a very interesting process,” he says. “We took two companies — one that has the knowledge of how to advertise, and the other with knowledge of the business. One of our main business lines is in the area of psoriasis treatment, and the PhotoMedex people knew a lot about psoriasis and psoriasis treatment. They knew about the view in the market, the conditions of the marketplace, how physicians view it and the market’s view of that.

Through a unified effort leveraging the areas of expertise that now existed in the combined PhotoMedex, the company’s advertising specialists developed an advertising strategy based on the selling points of the company’s products.

“We had work sessions where we drilled down on the information,” Rafaeli says. “Because of what we sell, we deal with a lot of FDA regulations, so we have to be very regulatory-conscious in the way we advertise. Our quality and regulatory affairs manager oversees a lot of that.”

Advertising — especially in a time of change — is a risky proposition. You really don’t know how the market is going to receive the change until you see some reaction. You don’t really know what is going to appeal to customers. If you had a high trust factor between consumers and your product or service, you have no real way of knowing if that trust factor will survive a transformational change like a merger.

It’s a fact of business life that has been in the front of Rafaeli’s mind as he has watched PhotoMedex roll out its new advertising campaigns over the past year-plus. All you can do as a business leader is stick your neck out, observe the results, gather data and make adjustments.

“Because we’re so involved in advertising, we get questions about advertising from other businesspeople on almost a weekly basis,” Rafaeli says. “We tell them that they have to be very careful and diligent, because advertising can be a very, very risky business. You can go out and spend money, get no results and have no idea why you didn’t get results. You don’t know if it’s because you failed to choose the right targets or the right price point or some other factor.”

Early in the process, Rafaeli and his team decided to focus on a straightforward and positive approach to advertising. PhotoMedex ads can vary greatly in how the message is conveyed, depending on media and geography, but the clarity regarding the product and the company behind it are constant themes.

It’s an approach that has helped galvanize PhotoMedex’s marketing strategy and has helped to make the merger an overall success. The company generated $110 million in sales for the first half of 2012, with full-year projections of more than $230 million.

“Consumers can be exposed to hundreds of different types of ads every day, and many of them are either negative or misleading. They can try to tear down what the competition does, or promise results that they can’t deliver.

“But what I think is truly effective in an ad campaign is a straightforward approach that doesn’t create unrealistic expectations. And what an effective ad campaign really means is that when the need arises, you will trust our company. You will pick up the phone or go on the computer, and you will look for us.”

How to reach: PhotoMedex Inc., (215) 619-3600 or www.photomedex.com

The Rafaeli file

Dolev Rafaeli, CEO, PhotoMedex Inc.

Born: Haifa, Israel

Education: Bachelor’s degree in industrial engineering and master’s degree in operations management, the Technion — Israel Institute of Technology; Ph.D. in business management, Century University

More from Rafaeli on the advertising strategy of PhotoMedex: Our advertisements might look a little different, perhaps even awkward, to some people. We have an advertisement in a number of magazines where we show a woman shaving her face with a blade.

The reason we do that is, one of the products we sell is called no!no! hair removal, and we saw that one of the key drives for buying the product was female facial hair. There is not really any other solution to that besides a hair removal product. A woman isn’t going to put a razor blade to her face. And when we were testing this, we knew the reason we had bought and sold over 3 million units. We knew why people needed it, but we didn’t know how to convey the message.

We went about doing this very carefully, having clinical ads and physicians talking about it, and it didn’t work. So we decided to try something that might be perceived as awkward, having a woman shave her face. We put that on, and six months later, in a number of major magazines, you see our ad.

When it came to psoriasis, the key discussion also became, ‘What do we show? Do we show people with psoriasis? Or do we go to the other extreme, like ads for erectile dysfunction medications in the U.S.?’ Obviously, they’re not going to show anything like that in a literal sense. They show couples on the beach having fun and so forth.

We tested it in certain ways, and we ended up not showing the psoriasis treatment at all. People who have psoriasis know what they have. They don’t need to see it. People who don’t have and who will never have psoriasis don’t care to see damaged skin.

Takeaways

Align your management team.

Roll it out to the rest of the company.

Advertise with a direct message.

 

Natasha Ashton – How to overcome your social media butterflies and make this powerful force work for you

Natasha Ashton

Natasha Ashton, co-CEO, Petplan

It’s no secret that some companies struggle with creating an effective presence on social media. Navigating the tightrope between overt sales messaging and empty musings is tricky; turn your fans and followers off, and they’ll abandon your page as fast as they can click “unlike.” Inadvertently create a controversy, and, well, the consequences can be ugly (not to mention cached forever, thanks to Google).

The simple fact that most social media is “free” does not mean that we, as business leaders, don’t need to invest in a strategy. While we all know what not to do, it’s much more difficult to create a road map for what will drive engagement across social media.

At Petplan, we integrate our company culture and brand values into our social media activities at every opportunity.

But we don’t just talk about ourselves — we share stories of our fans and family members and invite our community to join in the conversation. We don’t just give news updates; we create destinations that are rich with exclusive content that is truly useful to our community members.

With social media, the driving force behind our approach, as it is with everything else we do, is our core value: Pets come first.

Our approach seems to be working, both in terms of driving incremental traffic to our company and also in raising our profile in traditional media. Two months after creating our Pinterest presence, Social Media Delivered, a social media consulting organization, included Petplan on its list of top 20 companies globally using the site.

Content is king

Content is the currency of social media, so you need to make sure that every tweet, post and pin has value. What makes it worthwhile? If the information you are sharing enables your audience to act on your shared values, it’s worth posting.

For Petplan, that means delivering content that helps people provide the very best for their four-legged family members. It matters to them, and it matters to us — this synergy drives engagement and earns us those ever-important likes, retweets, shares and pins.

Don’t copy, complement

Many businesses make the mistake of putting exactly the same content on all of their social media channels, but this one-size-fits-all approach simply doesn’t work.

Each social media site has a distinct character and a unique audience who favors it; if you’re not playing to the medium, chances are you’re missing the message. Share industry and personnel news on LinkedIn, tweet breaking news and updates, post interesting photos and calls to action on Facebook, and pin your most engaging images related to trending topics on Pinterest.

Think of each channel as another facet of your business’s personality and tailor your content to that.

Optimize

If you want to harness the power of social media, you need to make it easy for your audience to share — and easy for the content to be attributed to you. Optimize all your communication channels to include both “share” and “follow” buttons. Make sure your retweet widgets include your Twitter handle.

Use websites like sharethis.com to integrate social media into the content you produce. It will make your customer experience more meaningful and your social media standing more robust.

A solid social media strategy takes planning, time and a lot of attention, but if you invest the resources in building an effective presence, you’ll capture new customers, fans, friends and influencers.

Whatever you do, don’t forget the most important piece of the social media puzzle: analytics. Gaining quantifiable data gives you insight into social sharing behavior that will tell you what you’re doing right (and wrong!), reveal where improvements can be made and keep you on the path to becoming a brand powerhouse in the future.

Natasha Ashton is the co-CEO and co-founder of Petplan pet insurance and its quarterly glossy pet health magazine, Fetch! — both headquartered in Philadelphia. Originally from the U.K., she holds an MBA from the University of Pennsylvania Wharton School of Business. She can be reached at [email protected]