Three essentials to mastering the turnaround

Turning around a company isn’t as straightforward as stabilizing finances, containing costs or fixing operations.

More often than not, a turnaround goes well beyond the fundamental business issues, delving into areas such as employee attitude and temperament.

From my experience, there are three key areas that must be addressed in order to create the best possible opportunity for success.

Deal in reality

Optimism is a huge attribute of visionary leaders. It can, however, be an Achilles heel for those charged with leading a successful turnaround. Looking at a struggling business through rose-colored glasses can waste precious time and delay important decisions. A healthy dose of pessimism can be an advantage because it can help you address issues directly and immediately. When you deal in reality, you cut costs and rationalize your budget to fit the business trend — not what you would like it to be or what it used to be, but what it is.

For example, if your top line sales have been declining by 10 percent annually, you shouldn’t plan on them returning to flat in the next quarter. If you lost a customer that represented 15 percent of your business, you shouldn’t expect another to walk through the door.

Start taking the tough, immediate steps to stop the bleeding and give the business a change to heal. Most importantly, put time on your side. You need as much of it as possible.

Communicate often and openly

Don’t keep bad news hidden. Involve your organization and respect your people by communicating openly and honestly. As you enter into the turnaround phase, it is important to be direct. Demonstrate leadership and build confidence by laying out business realities and the tough steps that need to be taken. Equally important, build confidence, alignment and support by outlining the recovery plan. And don’t just speak, listen. Ask for your team’s support — and their ideas. Chances are most of your team will rise to the challenge. Those that don’t shouldn’t be there.

Plan thoughtfully and strategically

While cutting costs, you also need to be planning for growth. Not by being reactionary, but by thinking and looking to the future strategically and by asking important questions: How has the category changed? Who is your target and how can you best engage them? Where are the competitive gaps? More importantly, why does the business exist?

Reviewing and redefining your business or brand positioning can galvanize your organization behind a singular reason for being and start building back cultural glue that is often frayed in a struggling business. Here too, it is important to gain alignment.

Gain insights and perspectives from across your organization to form the final idea. Outside resources can help facilitate focused collaborative “ideation” sessions involving team members from all levels and areas of responsibility. Conducted properly, this can be stimulating; it can break down barriers and re-energize an organization that has gone through tough times. It also can create “shared advocacy” for the path forward and lead to developing a meaningful and thoughtful strategic plan that includes realistic timelines, roles and responsibilities and of course, financial benchmarks.

Once you gain buy-in from your board or ownership, the business positioning and strategic plan should be presented clearly, broadly and openly to the entire organization. Candor, openness and directness can build confidence and gain the level of support that you need to rebuild positive momentum.

T. Scott King is chairman of the board of Gordmans, a retailer based in Omaha with more than 100 stores. King spent 12 years at Sun Capital Partners, a private equity firm focused on turning around troubled companies. As senior managing director and co-head of the operations team, he was responsible for the performance of over 50 companies while at Sun. He is a board member of FlexShopper, a financial technology company that provides a seamless lease to own option for the consumer who does not have good credit.

Mal Mixon offers answers to readers’ questions on turnarounds and joint ventures

Editor’s note: This is the first installment of “Ask Mal.” Mal Mixon, former chairman of Invacare Corporation and a well-known entrepreneur, will regularly share his business advice and experience with Smart Business readers. Ask him a question at [email protected], and your inquiry could be the inspiration for his next column.

I have an opportunity to acquire a company and bring it out of bankruptcy. Can you give me some advice on how to turn it around?

A: If you feel strongly that the company still has a heart, the first thing to do is to try to restructure it. Cut the fixed costs to the bone and look at improving cash flow.

But many people live in a dream world, and if the sales don’t supply enough margin, you really have to adjust your fixed costs to the level of business you are in. Banks will generally be supportive with lending if you are in a positive cash flow mode. Even though you may be losing money, if your EBITDA is positive, you can generally find financing to get you through the crisis.

The one principle that I would tell you about turning around a company is achieving positive cash flow. The point is, cash flow is more important than profit. Lengthen your payables and shorten your receivables. When you try to lengthen your payables, you don’t want your vendors to get too nervous that they cut you off. But generally, you can get another 15 to 20 days.

Look at a sale-leaseback on any property or buildings you own.

If you’ve got a plant, sell it and lease it back. That will give you some cash. You would be renting instead of owning a building or facility. With your sales representatives, if they have a high salary and low commission, you need to put them at a high commission and low salary.

Q: What do you think about joint ventures as a means of taking a company global?

A: When I was a young man, the company I worked for was trying to do some joint ventures, and I was never impressed because, first of all, you argue about who is in charge. If it is a 50-50 arrangement, nobody is in charge. That is even worse than having somebody in charge. Let’s say you make $100 million in this country — you only get to keep half of it.

Today the world is becoming one community. There are different languages and different cultures, but people essentially have the same challenges worldwide.

People should embrace it and accept the way it is. It is fun to compete in the world market. I have done business in virtually every country in the world.

You can sell in any country. You don’t need a factory to start. All you need are receivables, inventory, salespeople and service people. Later on, if your business gets large enough, you can build a factory or buy an existing one.

Mal Mixon is the former chairman of Invacare Corporation and a well-known entrepreneur. A complete story of Mal’s rise from rags to riches is told in his book “An American Journey,” published by Smart Business Books. It can be found at www.anamericanjourneybook.com and on Amazon.com. Visit www.invacare.com

 

A culture of transformation helped Theodore Zampetis erase Shiloh Industries’ $290 million debt

 

Theodore Zampetis, retired president and CEO, Shiloh Industries Inc.

Theodore Zampetis, retired president and CEO, Shiloh Industries Inc.

In January 2002, Theodore Zampetis took over as president and CEO of a struggling Shiloh Industries Inc. The leading manufacturer of advanced metal product solutions for high-volume applications in the North American automotive, heavy truck, trailer and consumer markets was $290 million in debt and the banks would not finance the company any further.

Zampetis had only a few weeks to either file a 10K with the SEC or file for Chapter 11 bankruptcy. Rather than roll over and give in, he began to execute a strategy, and he had to do it quickly.

“I got together with my president and my plant head and said, ‘Here’s what I am going to do. Here’s how I’m going to reduce cost and start creating cash flow tomorrow,’” Zampetis says.

Most people had all but kissed Shiloh Industries goodbye but not Zampetis. He knew he could turn the company around.

“We held a teleconference with the banks and all 12 entities were in on the call, and we explained the plan,” Zampetis says. “‘Here’s what is happening, here’s why it’s happening, and here’s what I’m going to do in the next 15 days, 30 days, three months, six months,’ and on and on.”

With time being of the essence, everybody started signing on quickly. Zampetis went around to each customer and plant to tell customers and employees what has happened, why it has happened and what the company’s plan was.

“I told them, ‘You will look back in six months and be proud of what you accomplished,’” Zampetis says.

Here is how Zampetis nursed Shiloh Industries from the edge of bankruptcy and brought it back to life.

Stop the bleeding

Once Zampetis made everyone aware of the dire situation the company was in, he began to focus on stabilizing the business.

“It was execution in three areas: No. 1, I’ve got to stabilize the company because the company was sick, demoralized and it was dying,” Zampetis says. “Once we stabilized the company, the next thing was figuring out what was the root cause of the problem.”

Zampetis had to understand where the company made money, where it lost money and why it was making or losing money.

“Once we started characterizing the process at each plant internally and focusing internally, it became clear to me what the priorities were in the bigger picture of the company and what I had to do,” he says. “Yes, there were a thousand problems, but I didn’t care about the thousand problems. I only cared about the top 10 problems and how I could attack them quickly one by one.”

At the same time, there were external pressures. For instance, one of Shiloh’s main customers had good news for the company. It still had a multimillion-dollar program with Shiloh that it wanted to continue with the organization. The only problem was that Shiloh had no cash to fund the program.

“I said … ‘We are going to the customer and let me talk,’” Zampetis says. “The next day, we were at the customer talking to the highest level in purchasing, and I told him that, in my 31 years in the business, I never thought I would go to the customer and politely, but with tears in my eyes, tell him that he’d better take the contract he awarded to us and give it to someone else, because we simply have no cash.

“‘Under your terms and conditions, we cannot do it. However, if you help us, we can probably do it and do it better than anybody else in the world.’”

With the banks unwilling to budge because the company was $290 million in debt, Zampetis and the executive director of purchasing at the customer company negotiated back and forth until they agreed to help Shiloh Industries fund the program for them.

“I knew one thing; even though this would be a battle going forward, there was only one way to go, and that was up,” he says. “From that point on, Shiloh Industries started climbing and generating cash flow and applying that cash flow back into the company to protect our critical skills and technologies.”

Shiloh’s critical technologies were devastated. The company needed to understand how to bring them up to be best in class and, at the same time, not to let any program down or make any customer dissatisfied.

“We started generating cash flow and applying it intelligently and above all, started deleveraging the company,” he says.

Remain laser-focused

Once the company began to slowly recover, Zampetis had to make sure to communicate throughout the organization so people stayed focused and kept moving forward strategically.

“If we are going to reinforce a culture of transformation, we have to communicate and we have to communicate not only our problems but give our employees, from top to bottom, an idea of what is the source of the problem,” he says. “You have to have a disciplined mind to characterize the process quickly and identify and measure the impact and analyze.”

Moving forward, Zampetis made sure that any decision he made was strategic.

“When the company is in deep trouble, you’ve got to make decisions strategically about all the wonderful ideas that got you into the problem to begin with,” he says. “The old management team did not learn their lesson.”

Shiloh had three objectives: No. 1, to stabilize the company and start generating cash flow, No. 2, to apply that cash flow to deleverage the company and rebuild the company internally, and No. 3, to develop its people to be disciplined so such past situations never happen again.

But just as the company was regaining its footing, the recession of 2009 hit. Chrysler and GM, which make up 60 percent of Shiloh’s business, filed for bankruptcy.

“Everybody thought we were done,” Zampetis says.

Be forward-thinking

As signs that the economy might be in trouble began to spread, Zampetis and Shiloh Industries were taking precautionary measures.

“If you look at our records and look at what happened in November 2008, I took my salary down to almost nothing because I knew there was going to be a disaster,” Zampetis says.

Shiloh’s sales went down 53 percent, its variable manufacturing cost went down 49 percent and its fixed cost, including Zampetis’ salary, went down 39 percent. However, the company made sure to protect its critical skills during the recession.

“I showed our leadership that in a moment of crisis I wasn’t thinking about lining my pocket,” he says. “I told them, ‘We are suffering and sacrificing right now, but at the end of the day, you will look back and be so proud.’”

During 2009 when all of this was happening, Shiloh Industries ended up generating $18 million extra free cash flow and reduced debt.

“In 2010, we were expecting the industry to start picking up because some of our competitors went bankrupt in 2009, and we picked up a lot of their business,” he says. “Our sales revenue from 2009 to 2010 went up 69.7 percent.”

The company’s productivity nearly doubled, its technology became extremely efficient, quality was exceptional and the employees were pumped up about the company’s progress.

“The year 2011 was a wonderful one, and 2012 was a very good year,” Zampetis says. “We now are a clean-balance-sheet company. We have advanced technologies that are the best in the world.”

Today, Shiloh Industries is a $600 million company with 1,400 employees. With the company back to pre-crisis levels, Zampetis decided to retire as president and CEO in December 2012. However, he left the incoming leadership with a very stable company.

“It will be a two-point approach,” he says. “One is to maintain all the good disciplines and don’t water them down because that would be a big mistake. But then the company’s mission looking forward is growth.” ●

How to reach: Shiloh Industries Inc., (330) 558-2600 or www.shiloh.com     

Mike Pitcher led LeasePlan USA through the credit crunch

Michael Pitcher, president and CEO, LeasePlan USA Inc.

Michael Pitcher, president and CEO, LeasePlan USA Inc.

The financial meltdown that rocked the economy in late 2008 damaged U.S. businesses in myriad ways — but LeasePlan USA Inc. was one of the unfortunates that got hit from several angles at the same time.

LeasePlan, which provides automobile fleet management services and manages about 385,000 vehicles for its clients across the United States, is basically in the business of financial services. It helps companies finance and service their vehicle fleets. When the meltdown happened, liquidity and credit dried up practically overnight, making things very tough for LeasePlan.

“All of a sudden, these things became a huge issue for us,” says Mike Pitcher, LeasePlan’s president and CEO. “In that environment, a lot of our clients were under a great deal of financial pressure. And so were we, with regard to liquidity, cost of funds and simply doing business as usual. Financial services and the entire industry were very challenged.”

At the same time that liquidity and credit were drying up, the recession began to stifle many sectors of the economy, sending some of LeasePlan’s key corporate clients into downturns of their own. Consequently, those companies started looking for ways to save money. And one of the line items they began to scrutinize closely was vehicle fleet costs.

“Some of our clients were starting to downsize,” Pitcher says. “Their fleets were getting smaller, and they started looking at different options for vehicles as well.

“A telltale sign for us was that, before this downturn, the six-cylinder engine was always the predominant engine in our industry. Nobody ever ordered four cylinders for fleet. But we started seeing some of that. We started seeing some of our clients not only downsizing the number of vehicles in their fleets but using smaller vehicles. And they were holding onto vehicles longer instead of replacing them.”

All of these factors put strong downward pressure on LeasePlan’s business.

“In ’09 and ’10, we saw our overall fleet — the total amount of cars we finance — go down quite a bit,” Pitcher says. “I can tell you that our overall fleet went down by thousands of vehicles. It was a substantial drop. It got our attention. These were significant client behavioral changes we were seeing. It was an indication that some fundamental changes were happening in our industry.”

Focus on controllables

Pitcher pulled his management team together to come up with a practical plan aimed at pulling LeasePlan out of the down spin it was falling into.

“One one hand, we knew we had a credit crisis going on,” Pitcher says. “The availability of credit and liquidity was a serious issue for us. But that was really at a macro level and largely beyond our control.

“So what we decided to do as a company and as a senior management team was we started talking about how we could get back to the basics and get all the basics right.”

The result of these deliberations was a new five-year strategic plan dubbed Triple Crown, which LeasePlan put into effect near the end of 2009.

“Our Triple Crown initiative was based on our performance in serving our three main groups of constituents,” Pitcher says. “Those constituencies are our employees, our clients and business partners, and our shareholders. And we said that none of those were more important than the others. Each was critical and fundamental to our business.”

LeasePlan’s Triple Crown five-year plan set forth concrete objectives regarding how effectively the company serves each of those three stakeholder groups. The plan laid out methods to measure employee engagement and client loyalty and goals to be reached in both of those areas based on those measurement methods.

LeasePlan’s shareholder return objective was to achieve a double-digit percentage increase over the five years covered by the Triple Crown initiative.

“We started to measure employee engagement — not just satisfaction but employee engagement,” Pitcher says. “We started to measure customer and client loyalty — again, not just satisfaction but loyalty — with the key definition of loyalty based on whether the client would refer us and whether they had an intent to repurchase and do business with us again.”

LeasePlan hired a consulting firm, TNS, to periodically survey its employees as a means of measuring their level of engagement in their work.

One of the initial findings was that LeasePlan has an unusually high percentage of workers classified as “drivers” — that is, passionate, already highly engaged employees who act as if they have an ownership stake in the company and work hard to deliver exceptional service every day. They learned that with such a high percentage of “drivers,” communication becomes even more critical than usual.

“We learned that with a group like this, you can never communicate too much,” Pitcher says. “Part of the reasoning for this is that in the absence of truth, people will start to make stuff up. If you don’t tell them the truth — clearly and consistently — they’re going to make something up. And usually it’s something far worse than things actually are.

“So we started having regular town-hall-type meetings and monthly communications from myself and our CFO regarding our financial performance and monthly emails from our chief sales and marketing officer talking about accounting and departures.”

LeasePlan also pledged not to lay off workers except as an absolute last resort and managed to live up to that pledge, even through the recession’s darkest days. The company implemented a two-days-a-week, casual-dress program and a weekly “dress for success” day, as well as an employee health program called HealthyU that includes free biometric testing, a weight-watching program and a running group that participates in 5K races — all of which have been popular and have helped increase the company’s employee engagement scores.

“We’ve received great feedback from our employees,” Pitcher says. “They love these programs. They’re great morale boosters, and they cost the company little or no money.”

Gauge allegiance

As part of its Triple Crown five-year strategic plan, LeasePlan engaged an outside firm to interview its clients by phone to measure their degree of loyalty as well as their perceptions about LeasePlan’s customer responsiveness, its level of innovation, its technological know-how and the value of its service vis-à-vis how much it charges for that service.

“Client loyalty is really about a lot more than client satisfaction,” Pitcher says. “It’s about a client’s intent to repurchase. Will (clients) be willing to spend additional dollars with you as a vendor? It’s about expanding services and share of wallet and whether they’re willing to be a referral for you if another client would call. Those are the factors that drive client loyalty.”

Pitcher proudly notes that LeasePlan is now laying the groundwork for a new five-year strategic plan because it achieved all the goals of its Triple Crown five-year plan in just three years.

“We laid out a five-year plan, but our team hit all the metrics we set forth in that plan within three years,” Pitcher says. “We achieved them all during 2012. This plan brought us back to pre-credit-crisis levels of profitability.

“We hit our metrics in all three areas — employee engagement, client loyalty and shareholder return. So now we’re back to the drawing board, looking at what our next five-year plan is going to look like.”

Asked what key pitfalls he has learned to avoid while leading LeasePlan through the credit crunch and financial downturn, Pitcher says he strongly suggests resisting a common mistake.

“One of the biggest pitfalls is surrounding yourself with people who always tell you you’re right,” he says. “If you get a big enough audience with very diverse and original ideas, you’re going to find out you don’t have all the answers. As a CEO, you can become very insulated, and people won’t bring you the real problems and the real challenges. You have to stay away from a group of advisers or managers that simply always tell you you’re right.”

Pitcher also recommends empowering the rank and file to help find the solutions your company needs when it gets in a tight spot — and be sure to acknowledge those contributions.

“One of the things we learned is that your team members really want to be part of the solution,” Pitcher says. “They want to be heard. And they usually know best how to attack a problem or an opportunity and find the solution. Our best recommendations and suggestions almost always come from front-line employees.

“The other thing is — and I know this sounds trite, but it’s really not meant to be — people want to be recognized for a good job. People do a lot of good things, and it’s leadership’s responsibility to catch people doing things right, make a point of to others and say thank you.”

How to reach: LeasePlan USA Inc., (770) 933-9090 or www.us.leaseplan.com 

The Pitcher File

Mike Pitcher
President and CEO

LeasePlan USA Inc.

Born: New Orleans, La.

Education: Bachelor’s degree in marketing, University of Louisiana at Lafayette; MBA, Emory University

Looking back over your years in school, do you recall any important business leadership lessons you learned that you still use today?

That you can learn from any experience, good or bad. From good leaders you can learn good aspects of leadership — but you can also learn from bad leaders, what not to do. There are role models on both sides of that coin, and if you take every experience as a learning experience, I think you can become a very well-rounded leader.

Another important lesson is that attitude is everything. In the face of crap, you can say, “The whole world is falling apart, and there’s nothing I can do.” Or you can say, “This is an opportunity.”

What was the first job you had, and what business lessons did you learn from it?

I was a painter and sandblaster on oil rigs in the Gulf of Mexico. I worked 21 days straight, 15 hours a day. In other words, I worked a 105-hour week for three weeks in a row. And the lesson I learned is that I wanted to make a living with my mind, not my back.

Do you have a main business philosophy that you use to guide you?

It simply would be that people have an inherent desire to be successful, and management’s main objective should always be to harness their passion and find ways to show them how they can succeed.

What trait do you think is most important for an executive to have in order to be a successful leader?

If I had to pick one, it would be integrity.

What’s the best advice anyone ever gave you?

Never do anything your mama wouldn’t be proud of. My older brother said that. Having been raised by my mom for a long time, I would say that’s up there.

Turbocharger: Bob Duncan takes the wheel at Indianapolis Airport and brings the ship in for a three-point landing

Bob Duncan, executive director, Indianapolis International Airport

Bob Duncan, executive director, Indianapolis International Airport

Bob Duncan was taken aback a little when he went to a meeting last year as the new Indianapolis International Airport executive director.

There were only three people at the meeting. It was the employee engagement committee.

“I said, ‘What’s going on? Where are the rest of them?’”

It turned out the committee hadn’t been maintained that well. The group needed new leadership and was ready for a revival.

When Duncan along with the HR director breathed new life into the committee, it was re-energized into a much more interactive and robust employee group.

“So that’s worked really, really well in the last year,” he says.

It turns out that making things work well is Duncan’s signature. He had been with the Indianapolis Airport Authority for nearly 40 years and previously served as general counsel and COO. Duncan was closely involved in the planning of the airport’s new midfield terminal, which opened in 2008. Add serving as interim executive director in 2012 to his resume after the previous director and the board of directors parted ways.

As he came into the leadership post, he was fortunate that he had a fairly clear picture that the culture under the previous administration was not as collaborative as he would have liked. He already got to know over the years hundreds of employees by their first names, so the territory was familiar.

“But I viewed the culture as tense,” he says. “Kind of silo-ish. You hear that a lot, that people had developed silos, which was not efficient in my mind. With the reorganization that I did, I broke down the silos.”

Here’s how Duncan eliminated the silos, built up teamwork and put his signature on the culture at the Indianapolis International Airport, which had revenue of $193 million in 2011, serving 7.5 million passengers.

Instill a sense of teamwork

If you’ve determined that your mission is to make your organization’s culture more collaborative, the most important sense to instill is that of teamwork.

Duncan realized that he needed to focus on the senior team members as well as the line service. He wanted to gain their trust, which would increase their commitment.

As a first step, Duncan recommends making yourself known.

“I made it a point to get out and about at virtually all hours,” Duncan says. “I have been known to show up at 5 o’clock in the morning and go to police roll call. I show up on Saturdays just to talk to people, particularly on second and third shifts, to let the folks know that I am interested in what they do and how they do it.”

As you cover your territory on foot, you will get to know your people better.

“I insist that my employees call me by my first name so that we can develop a team spirit,” Duncan says. “At the same time, you have to establish trust in management so that they know when a decision is made that may impact them, they understand why it doesn’t come as too much of a surprise.

“Be credible. Be open. Be approachable. Recognize the type of workforce that you have. I want them all to call me by my first name.”

As an example of building trust, he cited a recent instance when the airport’s public safety officers, which are not law enforcement personnel, were privatized. Rather than eliminating the 38 jobs, Duncan found a private security firm that would start to re-employ the officers at the airport in similar roles.

“So everybody that day walked out knowing they had a future,” Duncan says. “That is the right thing to do when that happens. It established trust in management, that we were sensitive to the feelings of the people, and I didn’t want people walking out with a change like this without the security that they knew they were going to have a job and benefits. That’s what we did, and it worked really well.”

Look for inefficiencies

A shakeup will always cause people to sit up and take notice. It’s a sign that you are in charge and want to try a better idea, hopefully to get better results.

Duncan reorganized his senior leadership staff, and it resulted in the reduction of some positions. However, it not only shrank the senior management numbers, it improved the organizational efficiency.

“I literally abhor bureaucracy,” Duncan says. “We are a quasi-governmental entity so there is a certain amount of statutory bureaucracy that we have to deal with. But what you deal with about internal planning and internal decision-making, you try to cut down layers of the approval process so that you empower people to make decisions and do that in a collaborative manner.”

A sore subject for some executives is the number of hours of meetings they often have on their calendars. Duncan is a firm believer that such time often could be spent more productively.

He took 18 hours of senior-level meetings a month down to four.

“Let’s say there was a senior-level meeting, and then two days later, there would be a senior-level meeting with the director-level people,” he says. “So there are five hours of just talking. What I’ve done is to have all the senior managers meet at the same time with most of the directors at 9 o’clock every Monday morning.

“Everybody brings everybody up to speed, and then once a month, we bring in directors, managers and supervisor levels so anything that they want to talk about, we can bring up. That’s worked really well for me.”

Spending less time on unproductive discussions forces managers to organize their thoughts and prioritize issues. It’s important that everyone gets together on the same page, and it should be done at least once a month.

“We have a project coordination meeting; it doesn’t last very long,” Duncan says. “We go down all the projects, so all the department heads know what projects are, where they are and what’s going on with them. So that’s the kind of attitude I want. I don’t want anybody sitting in their chair without getting up and talking to other department heads.

“Let senior directors and their directors develop their own action plans, their goals and initiatives,” Duncan says. “I can count on one hand and two fingers the number of times that I have gotten directly involved and changed something. That is because I know a lot of these people, and I trust their judgment, they trust mine, and that’s really important to the effective operation of the organization.”

Duncan says it is essential that the CEO encourage his team to challenge the leader’s ideas without fear of any potential negativity. It’s part of being flexible.

“I can remember when I reversed myself twice in the same day,” he says. “Someone came up to me and said, ‘You sure you want to do that?’”

Members of a team should feel free to make mistakes and get the experience of surviving through them.

“I always ask folks that I come in contact with, ‘Do you know what experience is?’ I will get a wide variety of answers,” Duncan says. “Then I will say, ‘No, experience is the exercise of good judgment,’ and you get experience through the exercise of bad judgment. Everybody is going to have some of the bad judgment experience.

“Let people know that if they make a mistake, they are not going to get their head chopped off. As a team, we will work around those kinds of problems the best we can.”

You don’t necessarily have to say you’re not an asset to the organization because you just made a mistake.

“I don’t do that, I mean, there are certain folks that sometimes you try to do all you can to improve them and like all organizations, there are just sometimes when you have to say this just isn’t working,” Duncan says. “I work real hard not to have that happen.”

Nurture success and keep it alive

There comes a point in your effort to build teamwork that you want to know if your approach is working. If you aren’t seeing more employee engagement, it’s not working. Employees should feel a more collaborative effort. They know that you are in charge ultimately, but without teamwork, there is no progress.

“I think as an executive director or CEO, sometimes you have to keep your ego in check,” Duncan says. “At the same time, you are earning the respect of the people that you’re working with and maintaining that respect. You do that by empowering people.”

Also, look at your turnover rate.

“At the senior director, manager director level, we don’t have much turnover,” he says. “Since we do run three shifts a day, we have a little higher turnover rate in third shift janitorial services. But I am trying to figure out how I can reduce that rate of turnover, and it could just be the hours that the third shift works or things like that.”
Once the operation shows improvement, don’t get complacent about communicating with employees — and fall into the lure of email’s convenience. Duncan believes email has become too impersonal.

“If you are not careful, you can say things in emails that don’t mean or that people take the wrong way,” he says. “It is much better to walk around and talk to people — more of a face-to-face thing. Again, that’s part of my concept of openness and having people come in. I have two doors in my office and they are always open. People can walk right in anytime they want. “That’s the way I like it; some people don’t. I do.” ●

How to reach: Indianapolis International Airport, (317) 487-7243 or www.indianapolisairport.com

The Duncan File

Bob Duncan
Executive director
Indianapolis International Airport

Born: Philadelphia. I lived in New Jersey until I was 15. Then I moved to Indianapolis. I learned to fly when I was 16 years old, and I was a professional pilot when I went to law school. Flew all day, went to law school at night.

Education: Bachelors’ degree from Hanover College in Indiana, with a major in history and political science. I went to law school at Indiana University.

What was your first job and what did you learn from it?

I worked in service stations. I pumped gas, cleaned windshields, and I was a pretty good car mechanic back in the early to mid-’60s. Then I started flying.

What is the best business advice you ever received?

The gentleman that hired me, Dan Orcutt, executive director of the airport for 25 years — I’ve had the deepest respect for. I think part of my business attitude came from him. It was kind of what I have already said. He said, ‘Be credible. Be trustworthy. Be firm but be fair.’ I think that that works because sometimes in business negotiations, you have to be firm, sometimes vocal, but you always want to be fair. We work hard at being fair to ourselves and our business relationships but also to our customers and tenants. Sometimes we have to say no, and they don’t like hearing it, but they will always understand why and why the decision is what it is.

Who do you admire in business?

To be perfectly honest, I don’t know if I could drag it down to one particular industry. The aviation industry — one is Elaine Roberts, the president and CEO at the Port Columbus International Airport. She started here at the airport. I always admired her sense of fairness and her sense of doing the right thing, and at the same time making very sound business decisions. I really kind of admire her in my particular industry.

What is your definition of business success?

For me, it would be respect, that people shoe respect knowing that they would be treated fairly in dealings with the airport, that we are recognized for our integrity. That would be business success for me in addition obviously to positive financial results.

 

When the auto industry nose-dived, it dragged APCO’s warranty business along until Larry Dorfman found the key to ignition and payoff

atl_cs_dorfman_0413

Larry Dorfman, CEO and chairman, APCO

Larry Dorfman, APCO’s chairman and CEO, learned a cold fact of life the hard way: If your business is heavily dependent on another market sector and that sector takes a hit, you’re going to take a hit too.

And, boy, did that other sector take a hit. New car sales in the U.S. fell by almost exactly half in a little more than a year, says Dorfman, whose company sells extended warranties at 1,800 franchise auto dealers around the U.S. and commonly goes by the name of its extended-warranty brand, EasyCare.

“New vehicle sales dropped from 16.9 million to 8.7 million, basically in a 15-month period,” he says. “Used car sales suffered significantly too, but the hardest hit were clearly the franchise dealers.”

Dorfman didn’t have to go looking for danger signs. They came rolling at him like a tidal wave.

“You could literally see the volumes starting to slide, and we were attached directly to the number of cars that get sold at any given store [dealership],” he says. “If a store sells 100 cars, then you know they’re going to sell a certain number of extended service contracts. And if that 100-car store suddenly starts selling 50, then both of us have a problem. That’s just the way it is.”

It didn’t take long for Dorfman and his leadership team to figure out what they needed to change. APCO’s business was too dependent on car sales. The company had to find a way to broaden its base.

“Our benefits at the time totally focused on how many cars got delivered to a customer at a franchise dealership,” Dorfman says. “We started to recognize that we were on what we call a two-legged stool. Whichever way the car business went, that’s the way we would go too. Now, our company was founded in 1984, so we had been through a couple of recessions. We’d been up and down on a couple of these rides. Of course, nobody knew what this one was going to be like. But you sure could feel it coming.”

Set the table

APCO’s leaders quickly concluded that the stool on which their company’s fortunes were perched needed a sturdier base. Dorfman and his team knew that building that third stool leg would be absolutely critical to APCO’s long-term health, so they attacked the project meticulously and deliberately and from several angles at once.

In fact, APCO’s leadership team had set the table for these base-broadening measures before the downturn really started to seriously kick in — just as they began to sense it coming. Ford Motor Co. had bought APCO back in 1999 and had been operating as a subsidiary for about seven years.

For the first few years, that arrangement had gone swimmingly. But as Dorfman saw vehicle sales leveling off and creeping downward in late 2006 and early 2007 and with Ford increasingly sinking into debilitating debt and cash-flow problems in mid-2007 after more than a year of deliberation, APCO’s employees and equity partners purchased the company back from Ford.

“We bought it back, and then, from that point, the market continued to dribble down a little bit,” Dorfman says. “And, fortunately, we were able to start making some decisions — some investments — that we could not have made under Ford. This was one of the critical reasons that we wanted to buy the company back. We could see that they weren’t going to invest in our company.”

Then the stock market crash hit in 2008, and business went into free fall virtually across the board in the U.S., including automobile sales and, consequently, APCO’s business.

“One of our key financial measures is trailing 12-month EBITDA,” Dorfman says. “We watch that very carefully. And we went from $28.7 million at our peak — that would’ve been about ’06 — to $12.5 million after the crash, in ’09. So what do you do?

“Well, you know, the first thing you do is you take the gun out of your mouth. No, I’m kidding. Obviously, this didn’t all happen in one week. But it did happen pretty darn quick.”

As they saw the nose-dive gathering steam, APCO team members started looking for ways to get their company off of its two-legged stool and build a firm third leg for balance.

“The first thing we did is we looked at how we approach the business,” Dorfman says. “What we saw was that our business was totally affected by whether the dealer sold a car today or not. We knew that had to change. So we asked ourselves, ‘How else can we do what we do and stay who we are but, at the same time, move away from being so dependent on car sales?’”

APCO decided to focus on what it saw as an underappreciated and neglected area of its dealerships: the service department. It developed a software program called EasyCare SOS — Special Owner Services — to help its dealers better manage their customer relationships.

“It’s literally a CRM [customer relationship management] program,” Dorfman says. “It helps dealers manage their customer relationships throughout the ownership life cycle of the vehicle. We built this software to make sure consumers are approached the right way — that they’re notified properly but not overnotified when their vehicle is due for service, what specials are available, etc.”

The program has worked so well that APCO guarantees dealers a 500 percent return on their investment.

“We started that piece, EasyCare SOS, from scratch in late ’07 with two people,” Dorfman says. “Today, it has 36 people in it, and it contributed 8 percent of our profit this year.”

Invest in technology

In addition to forming EasyCare SOS, APCO made other investments. The company formed a retail division, it created a certified used car program in partnership with Motor Trend magazine, and it bought a company called CoVideo that had developed a sophisticated video email technology.

“The CoVideo technology allows you to create and send a video email as quick and easily as you could type and send a text email,” Dorfman says. “It’s very personal and immediate. You’re looking right at the person’s face: ‘We want to let you know it’s time for your vehicle to come in for service. Click here for an appointment.’ Or: ‘Hello. Thanks for the time on the phone. I enjoyed it. I look forward to seeing you when I come in next week. We appreciate your business.’”

APCO invested $900,000 in the CoVideo technology to build the infrastructure and create apps to deliver large quantities of video email efficiently to an array of mobile devices: iPhones, iPads, Androids and BlackBerrys. The company plugged the technology into its EasyCare SOS program so its dealers can use it to send video updates to their customers instead of regular emails.

“We did all of this during a down market,” Dorfman says. “In so doing, we turned digital customer interaction into a much more personal process.”

All of the investments have begun to pay off for APCO. The company’s key metric, trailing 12-month EBITDA, is growing again, and the company has paid off a substantial portion of the debt from its buyback from Ford Motor Co.

“Trailing 12-month EBITDA is back up to about $16.7 million from a low of $12.5 million in ’09,” Dorfman says. “So we’re back up 25, 30 percent. And that’s while making these major investments to grow the business.

“Also, we’ve paid our debt down to about $20 million during very tough times. We’ve built a broader base, which has expanded us further into our own business and actually outside the car business with CoVideo. This puts us in a strong position to continue to make more investments to grow the company.”

Choose partners wisely

Asked what advice he would offer business executives whose businesses are facing similar challenges, Dorfman ticks off several suggestions: Choose your business partners carefully, focus on delivering more than is expected of you, keep a finger on the pulse of your business, and stay ahead of the game with regard to expense management.

“You’ve got to have great partners, great clients and great employees,” he says. “You can’t ask more of somebody than the time and effort that you’ve taken to build a relationship with them. You can’t go to the bank and make a $300 deposit and then go back five days later and take $10 grand out. The bank doesn’t do that. And neither do customers, partners, investors.

“Your chances of being able to make a withdrawal are a lot better when you’ve made a substantial deposit. And what we did for a few years before and during this downturn is we continued to make deposits with the people we work with so we had a base to work from. Building that base really helped us.”

Dorfman says the most important thing he has learned while leading APCO through the financial crisis is that executives should never let market conditions dictate the pace of their business.

“If you buy in to everything people say about the market, you’ll be out of business in no time,” he says. ●

How to reach: Automobile Protection Corp., (678) 225-1000 or www.easycare.com

 

The Dorfman File

 

Larry Dorfman
Chairman and CEO
Automobile Protection Corp.

Born: Brooklyn, N.Y.

Education: University of Georgia

What was your first job, and what business leadership lessons did you learn from it?

I grew up working in our family’s office equipment business. I was in sales. I was given a car at age 16, and I had to pay for the gas and insurance with the money I made selling. My dad was my mentor — actually somewhere between my mentor and tormentor — and in both cases, he did a good job. He exposed me to a lot of opportunities, like learning how to go out and make cold-call presentations to businesspeople. And, you know, at 16 or 17, that’s a pretty interesting game plan. You learn quickly. And my dad was always there to go back to and talk about what worked and what didn’t.

Do you have a main business philosophy that you use to guide you?

One of the key things we learned as we went through the recession is we changed our philosophy from the hard sell to building a relationship with customers. I grew up in a hard-sell environment. But I think people have changed. They don’t like to be hard-sold anymore. Salespeople have to understand that you can’t ask more from a customer than what you’re willing to give them — your time, your effort, your knowledge.

What trait do you think is most important for an executive to have in order to be a successful leader?

Don’t be afraid to make a decision.

What’s the best advice anyone ever gave you?

You can’t take more out of a relationship than you put into it. I learned that from an instructor at a communications course I took in 1985 that was geared toward getting people to understand and learn to communicate better. It was a personal and business growth course.

When the auto industry nose-dived, it dragged APCO’s extended warranty business along until Larry Dorfman found the key

Larry Dorfman, chairman and CEO, Automobile Protection Corp.

Larry Dorfman, chairman and CEO, Automobile Protection Corp.

When the recession rocked the auto industry in 2008 and 2009, Automobile Protection Corp., which sells extended service contracts to car buyers, got rocked just as hard.

Larry Dorfman, APCO’s chairman and CEO, learned a cold fact of life the hard way: If your business is heavily dependent on another market sector and that sector takes a hit, you’re going to take a hit too.

And, boy, did that other sector take a hit. New car sales in the U.S. fell by almost exactly half in a little more than a year, says Dorfman, whose company sells extended warranties at 1,800 franchise auto dealers around the U.S. and commonly goes by the name of its extended-warranty brand, EasyCare.

“New vehicle sales dropped from 16.9 million to 8.7 million, basically in a 15-month period,” he says. “Used car sales suffered significantly too, but the hardest hit were clearly the franchise dealers.”

Dorfman didn’t have to go looking for danger signs. They came rolling at him like a tidal wave.

“You could literally see the volumes starting to slide, and we were attached directly to the number of cars that get sold at any given store [dealership],” he says. “If a store sells 100 cars, then you know they’re going to sell a certain number of extended service contracts. And if that 100-car store suddenly starts selling 50, then both of us have a problem. That’s just the way it is.”

It didn’t take long for Dorfman and his leadership team to figure out what they needed to change. APCO’s business was too dependent on car sales. The company had to find a way to broaden its base.

“Our benefits at the time totally focused on how many cars got delivered to a customer at a franchise dealership,” Dorfman says. “We started to recognize that we were on what we call a two-legged stool. Whichever way the car business went, that’s the way we would go too. Now, our company was founded in 1984, so we had been through a couple of recessions. We’d been up and down on a couple of these rides. Of course, nobody knew what this one was going to be like. But you sure could feel it coming.”

Set the table

APCO’s leaders quickly concluded that the stool on which their company’s fortunes were perched needed a sturdier base. Dorfman and his team knew that building that third stool leg would be absolutely critical to APCO’s long-term health, so they attacked the project meticulously and deliberately and from several angles at once.

In fact, APCO’s leadership team had set the table for these base-broadening measures before the downturn really started to seriously kick in — just as they began to sense it coming. Ford Motor Co. had bought APCO back in 1999 and had been operating as a subsidiary for about seven years.

For the first few years, that arrangement had gone swimmingly. But as Dorfman saw vehicle sales leveling off and creeping downward in late 2006 and early 2007 and with Ford increasingly sinking into debilitating debt and cash-flow problems in mid-2007 after more than a year of deliberation, APCO’s employees and equity partners purchased the company back from Ford.

“We bought it back, and then, from that point, the market continued to dribble down a little bit,” Dorfman says. “And, fortunately, we were able to start making some decisions — some investments — that we could not have made under Ford. This was one of the critical reasons that we wanted to buy the company back. We could see that they weren’t going to invest in our company.”

Then the stock market crash hit in 2008, and business went into free fall virtually across the board in the U.S., including automobile sales and, consequently, APCO’s business.

“One of our key financial measures is trailing 12-month EBITDA,” Dorfman says. “We watch that very carefully. And we went from $28.7 million at our peak — that would’ve been about ’06 — to $12.5 million after the crash, in ’09. So what do you do?

“Well, you know, the first thing you do is you take the gun out of your mouth. No, I’m kidding. Obviously, this didn’t all happen in one week. But it did happen pretty darn quick.”

As they saw the nose-dive gathering steam, APCO team members started looking for ways to get their company off of its two-legged stool and build a firm third leg for balance.

“The first thing we did is we looked at how we approach the business,” Dorfman says. “What we saw was that our business was totally affected by whether the dealer sold a car today or not. We knew that had to change. So we asked ourselves, ‘How else can we do what we do and stay who we are but, at the same time, move away from being so dependent on car sales?’”

APCO decided to focus on what it saw as an underappreciated and neglected area of its dealerships: the service department. It developed a software program called EasyCare SOS — Special Owner Services — to help its dealers better manage their customer relationships.

“It’s literally a CRM [customer relationship management] program,” Dorfman says. “It helps dealers manage their customer relationships throughout the ownership life cycle of the vehicle. We built this software to make sure consumers are approached the right way — that they’re notified properly but not overnotified when their vehicle is due for service, what specials are available, etc.”

The program has worked so well that APCO guarantees dealers a 500 percent return on their investment.

“We started that piece, EasyCare SOS, from scratch in late ’07 with two people,” Dorfman says. “Today, it has 36 people in it, and it contributed 8 percent of our profit this year.”

Invest in technology

In addition to forming EasyCare SOS, APCO made other investments. The company formed a retail division, it created a certified used car program in partnership with Motor Trend magazine, and it bought a company called CoVideo that had developed a sophisticated video email technology.

“The CoVideo technology allows you to create and send a video email as quick and easily as you could type and send a text email,” Dorfman says. “It’s very personal and immediate. You’re looking right at the person’s face: ‘We want to let you know it’s time for your vehicle to come in for service. Click here for an appointment.’ Or: ‘Hello. Thanks for the time on the phone. I enjoyed it. I look forward to seeing you when I come in next week. We appreciate your business.’”

APCO invested $900,000 in the CoVideo technology to build the infrastructure and create apps to deliver large quantities of video email efficiently to an array of mobile devices: iPhones, iPads, Androids and BlackBerrys. The company plugged the technology into its EasyCare SOS program so its dealers can use it to send video updates to their customers instead of regular emails.

“We did all of this during a down market,” Dorfman says. “In so doing, we turned digital customer interaction into a much more personal process.”

All of the investments have begun to pay off for APCO. The company’s key metric, trailing 12-month EBITDA, is growing again, and the company has paid off a substantial portion of the debt from its buyback from Ford Motor Co.

“Trailing 12-month EBITDA is back up to about $16.7 million from a low of $12.5 million in ’09,” Dorfman says. “So we’re back up 25, 30 percent. And that’s while making these major investments to grow the business.

“Also, we’ve paid our debt down to about $20 million during very tough times. We’ve built a broader base, which has expanded us further into our own business and actually outside the car business with CoVideo. This puts us in a strong position to continue to make more investments to grow the company.”

Choose partners wisely

Asked what advice he would offer business executives whose businesses are facing similar challenges, Dorfman ticks off several suggestions: Choose your business partners carefully, focus on delivering more than is expected of you, keep a finger on the pulse of your business, and stay ahead of the game with regard to expense management.

“You’ve got to have great partners, great clients and great employees,” he says. “You can’t ask more of somebody than the time and effort that you’ve taken to build a relationship with them. You can’t go to the bank and make a $300 deposit and then go back five days later and take $10 grand out. The bank doesn’t do that. And neither do customers, partners, investors.

“Your chances of being able to make a withdrawal are a lot better when you’ve made a substantial deposit. And what we did for a few years before and during this downturn is we continued to make deposits with the people we work with so we had a base to work from. Building that base really helped us.”

Dorfman says the most important thing he has learned while leading APCO through the financial crisis is that executives should never let market conditions dictate the pace of their business.

“If you buy in to everything people say about the market, you’ll be out of business in no time,” he says. ●

How to reach: Automobile Protection Corp., (678) 225-1000 or www.easycare.com

The Dorfman File

Larry Dorfman

Chairman and CEO
Automobile Protection Corp.

Born: Brooklyn, N.Y.
Education: University of Georgia

What was your first job, and what business leadership lessons did you learn from it?

I grew up working in our family’s office equipment business. I was in sales. I was given a car at age 16, and I had to pay for the gas and insurance with the money I made selling. My dad was my mentor — actually somewhere between my mentor and tormentor — and in both cases, he did a good job. He exposed me to a lot of opportunities, like learning how to go out and make cold-call presentations to businesspeople. And, you know, at 16 or 17, that’s a pretty interesting game plan. You learn quickly. And my dad was always there to go back to and talk about what worked and what didn’t.

Do you have a main business philosophy that you use to guide you?

One of the key things we learned as we went through the recession is we changed our philosophy from the hard sell to building a relationship with customers. I grew up in a hard-sell environment. But I think people have changed. They don’t like to be hard-sold anymore. Salespeople have to understand that you can’t ask more from a customer than what you’re willing to give them — your time, your effort, your knowledge.

What trait do you think is most important for an executive to have in order to be a successful leader?

Don’t be afraid to make a decision.

What’s the best advice anyone ever gave you?

You can’t take more out of a relationship than you put into it. I learned that from an instructor at a communications course I took in 1985 that was geared toward getting people to understand and learn to communicate better. It was a personal and business growth course.

Sony launches Xperia tablet in push for mobile success

NEW YORK, Wed Aug 29, 2012 – Sony Corp released an upgraded version of its Android tablet on Wednesday, branding its rival to Apple Inc.’s iPad and Samsung Electronics’ Galaxy as “Xperia” in a bid to unify its mobile devices under one name.

Sony has identified its mobile devices unit, which also makes Xperia smartphones, as one of its key units as it tries to overcome losses from televisions that contributed to an overall record net loss of 455 billion yen ($5.8 billion) in the year ended March 31.

Featuring a 9.4 inch screen and loaded with the Android 4.0 operating system, the Xperia is the second tablet from Sony, which released its first models in April last year.

At the time, Sony said it wanted to claim second spot in the increasingly competitive tablet market ahead of Samsung, but failed to ignite enough consumer interest in the devices.

The iconic Japanese consumer electronics brand also wants to boost sales of digital cameras and games consoles, while nurturing new businesses including medical devices.

Though more powerful than its predecessors, the new tablet from Sony also faces a more crowded marketplace. In June, Microsoft Corp introduced its first tablet, dubbed Surface.

Signs of a turnaround for Sony are yet to emerge.

On Aug. 2 it cut its full-year operating profit forecast to 130 billion yen from 180 billion, and slashed its combined sales target for Vita and PSP handheld games consoles to 12 million from 16 million.

How Ralph Sanese Jr. got advice that paid off for a better future at Sanese Services

Ralph Sanese Jr., president, Sanese Services Inc.

Ralph Sanese Jr. was pondering what to do with a substantial drop in revenue for his food service, vending machine and in-house cafeteria business that was started in 1946 by his father, Ralph Sanese Sr., and his uncle, Al Sanese. The drop had been a one-two punch: after Sept. 11, revenue was slipping, and then when the 2008-09 recession hit, the national vending industry dropped almost 30 percent in revenue.

The founders had accomplished a rags-to-riches dream, starting from scratch and taking the company above the $50 million mark in 50 years and — Sanese wasn’t about to give up.

“We were fortunate, our revenue only dropped about 20 percent, but still you have to manage a declining number, and it’s very difficult when you are a paternalistic organization — you’re trying to take care of people, and you have less revenue coming,” says Sanese, president of the 750-employee Sanese Services Inc.

“It was one of the toughest times, the declining revenue and all your people looking at you saying, ‘Ralph, what are you going to do about it? What do we do? What do we do?’”

Over the years, Sanese had sought help from several consultants. The results were mixed, and in one case, detrimental.

“I’ve been that route with the wrong consultants and sometimes we went the wrong way, and it cost us the worst financials that we ever had,” Sanese says. “They didn’t understand the business and what it took to really make it work, and even though we weren’t doing everything right, we were doing some things right.”

But as time went on, he was as determined as ever to get his company on the right track. He would try another set of consultants, but this time, the experience was unlike any Sanese Services had ever been through.

Here’s how Sanese vetted his next set of consultants, took the suggestions they made and parlayed the proposals into profitable results each month.

Lay the groundwork first

If a company that is several decades old doesn’t adapt to meet changes in customer tastes and preferences, it could very well suffer a decline in business or eventually go out of business, regardless of the economic climate. This time around, Sanese knew that he had to bring in an outside company to help him reconstruct and find a way to run a business model that definitely needed to be updated since its 1946 inception.

“That was difficult because we felt we knew everything about this industry,” Sanese says.

“If you need some outside help, that’s the first thing. Do you need outside help or can you internally make some changes work? A lot of times, the old rule of thumb is consultants are people that you bring in to say something to your folks, something you know you should do but what you can’t say. It has to be done. It’s the truth. Get somebody else to say It. For us that’s how that worked for some matters.

“The one thing that I did learn is that before, in my younger years, I would have said, ‘This is what we’re doing, guys, and that’s it.’ What I did this time, I brought this company in, I interviewed them and I felt good about them.”

Sanese attended a presentation a firm gave at the Conway Center for Family Business in Columbus.

“I liked what they had to say, and I got references from customers” he says.

But once bitten and twice shy, Sanese decided he would visit companies where the consultants were on the job. That way, he figured, he could see them in action and decide if the firm was a good fit and could deliver for Sanese Services.

“We actually went to this facility, and we went right into the shop floor where they were helping this company with its manufacturing processes — and I walked the floor with the owner of the company,” Sanese says. “He told me quite frankly at first he didn’t believe the consultants. But he said, ‘I am going to tell you, here’s what they did,’ and I walked the plant without the consultants, with the owner and he showed me how it was working.”

Sanese also visited a couple of other companies to make sure that the consultants had a vested interest in what that company needed — and not what they wanted to bring to it.

“I would definitely check their references, that helped us, and I would check those references to the nth degree,” he says. “That’s what we did.”

Decide on the core issues

When considering a company makeover, turnaround or whatever you want to call it, it’s best to focus on a minimum of key issues. Trying to solve too many problems the wrong way could lead to a letdown.

One of the approaches was to appoint a team of trusted employees to work with the consultants. The team members will be the go-betweens and should be able to vigorously defend their positions if they feel strongly about a particular matter.

“I brought in a team that was going to help me make it happen, and I let them go through their motions with the consultants,” Sanese says. “I brought in our people because we had been through consultants before, trying to find that silver bullet. I brought in the right people to help me execute a well laid-out plan to improve our core business.

“And once you decide that this is the right thing to do, make sure that the team embraces it and that they are going to be a part of this process and not buck the movement.”

The two teams hammered out a two-pronged approach: reducing product costs and getting delivery routes and labor costs more in line.

“Those were the key things, so you start out with a couple of key fundamentals that you want to get a handle on,” Sanese says. “We showed them what we had and they wanted to expand upon those tools with an improvement in software and managing.”

The company put together a dashboard website that provided current financial information on the company’s revenue and expenses. It was a way for employees

to get right into their own financials and understand their business division.

“They would be able to understand the key components and the key indicators of what each business division works off and how they could help to manage and navigate their own business division to make better and quicker decisions,” Sanese says.

The introduction of new technology to manage financials may come with some bumps along the road, however. There may be issues with employees not wanting to accept change and with others nervous about the openness of financial information.

“We’ve gotten better using some of the technology,” Sanese says. “Some folks had to change — they didn’t want to use technology. Some of these guys have been around for a lot of years and they didn’t want change. So you have got to go through some of those things with them. We have had to make several changes with people that had been with us for a while.

“Then you have to share the financials with every employee. We share everything so that they know how we are doing. We’re very transparent. I don’t hide anything. I just think it pays you dividends in the long run. I don’t think showing too much is a big mistake.”

Sanese found that sometimes, financial officers were not always comfortable about sharing information.

“You never want to be vulnerable to one person anymore,” he says. “What I wanted to do was to have our folks, including me, be stronger at our home company financials to understand where they can make responsibilities and make changes and make them quickly.

“Transparency is what employees want nowadays,” Sanese says. “They want to be a part of something. They want to see if they can make improvements to the organization. They want to be measured on that.”

This contrasts with some older or more conservative attitudes that in previous times, you didn’t want to share too much. You were afraid the wrong eyes would see the data.

“That’s what they did back in those days,” Sanese says. “Close to the vest. Don’t tell them everything. Don’t ask how we are doing. Your business heads had to wait for your financial people to tell them how they did.”

Build enthusiasm with successes

Many business experience seasonal problems with cash flow problems, Sanese Services included. But the company put itself on the road to a better performance by using its new dashboard reports — and other plans to increase business.

“We’ve done an analysis on each business division every week for the last 2.5 years and before, we would always lose money in January, June, July and August,” Sanese says. “Always. Not anymore. Now we consistently earn a profit, not a lot during those months, but turning a profit versus a loss is a great swing.

“So that’s what you need to do when it comes to improve each of the businesses and then your business heads don’t wait for your financial people to tell them how they did − they already know it. They are measuring it with metrics.

“You know the old saying, ‘Measure twice, cut once’?” Sanese asks. “Well, now we are measuring a whole lot more than just twice, I can tell you that. And it’s working.”

It helped the company with everything from keeping track of product transfers from a tractor-trailer, to products being processed, ordered and shipped to the actual location and how it’s tracked.

“Our own folks got enthusiastic because they could see the differences that they were making, and they could see if their costs were shrinking, let’s pick an average of 52 percent product cost, and our goal was set at 42.5 percent — they wanted to see how they were doing toward that goal,” he says. “Then we rewarded them, and did other things for them. To this day, we have a managed cost per route and that’s how we operate this business today.”

To help keep costs down, the up-to-date financials gave a picture of what was given away or wasted.

“We have to give away a lot of product in the food service industry,” Sanese says. “But we never did know how many cases of napkins or forks, knives and spoons went out; or a gallon of gas or diesel fuel that went in the truck; or waste of product, if you are loading too much on a truck.

“So we employed the consultants’ recommendations to help us control our waste on these routes, and that was a big and important part.”

While looking at the concepts a modern business model needs to employ as compared to the traditional one if you want to increase revenue, it is valuable to stick to your core business but yet find ways to diversify.

“We knew that we needed to diversify the organization because our business was changing,” Sanese says. “Manufacturing was being hurt in Ohio. I couldn’t keep feeding the manufacturing folks; their numbers were down. I knew I had these kitchens, so I had to find a way to keep our associates working and find other places where we could distribute fresh product.”

To expand your market, finding prospects that are extensions of what you already do can be the answer.

“We got into the school business, and then we got into the senior meal-feeding business,” Sanese says. “We know that’s a growing market because there are a lot of seniors. So that’s how we diversified the business because we had a fleet of refrigerated trucks, we had certified food safety people, and we know food. If we could stick to the core business of what our company is really known for, making fresh food on somebody’s site like a big in-house café operations, then we would be OK.

“It’s a new way to do business and you don’t lose the values of what your company was founded on; it’s just the improvements matching what the industry is being called to do now.”

How to reach: Sanese Services Inc., (614) 436-1234 or www.sanese.com

The Sanese file

Born: Columbus, Ohio

Education: Franklin University. I earned a degree in business. I put myself through school. It was one of the things my father made me do: ‘If you ever want to be an officer in this corporation, you are going to have to go to college, and by the way, I am not paying for it.’

What was your first job?

I had a lawn cutting business and I had all the neighborhood yards, and I did mulching and all that. By the time I was 16, I probably had $5,000 in the bank. That was back in the early ’70s. I bought a Pontiac Firebird with that money, and I drove myself to school.

What is the best business advice you ever received?

I was always taught to hire people that were smarter than you were and that could help you to complement the skills that you did not have. I probably haven’t done a good enough job of that, but I’m still trying. I’m still trying to do that. And ask for advice. Ask for help.

Beyond that, my dad and uncle would tell me some of the greatest things in the world These are some of the principles and fundamentals with which I was raised:

Look a man in the eye and tell him exactly what you’re going to do and live by your word no matter what. You don’t need a piece of paper to tie into it. Shake a man’s hand, that’s what you mean, period. You never you give up on being an ethical, principle-driven person. No matter what, you have to always do the right thing. No matter how tough it is, you have to always do the right thing. You have to work harder than everybody else does. Lead by example — you have to do it. And always protect the entity, because it will protect you. Protect it first. Take care of it first.

Whom do you admire in business?

I loved John McConnell of Worthington Industries. Of course, he’s passed but he would be my all-time choice. Doing the right thing was at the center of everything in his life. I just think the absolute world of the man.

What’s your definition of business success?

The people in your own organization reaching heights they never thought they could obtain. And then having a company resistant to losing business and gaining new business, modest growth every year. I always wanted to be the biggest — but I don’t care about that anymore. I just want to be the very best at what we do and protect that reputation.

Craig Shular helped GrafTech International take hard steps toward growth

Craig Shular, Chairman, President and CEO, GrafTech International Ltd.

Craig Shular is an upbeat guy, but even he accepts that things had gotten pretty ugly at GrafTech International Ltd. in the early 2000s. Debt had surged to more than $1 billion despite net sales in the $500-million range. Shareholders couldn’t flee the publicly owned company fast enough.

“Most people had written us off,” says Shular, chairman, president and CEO at the manufacturer of carbon and graphite products. “The banks had frozen all our facilities. Suppliers were making us pay cash on delivery. It was that kind of environment.”

Big problems often require big cutbacks and this situation was no different. The company ended up going from 10 graphite electrode plants to five and reduced its employee count from 5,000 to about 2,200. Benefit programs had to be completely redone.

“Brutal,” says Shular, when asked to describe the steps that had to be taken at the company’s low point. “A very tough process.”

The challenge for Shular was that in the midst of all this turmoil, he had to find a way to get the employees who remained at GrafTech to buy into his plan to get the company back on its feet.

He had a vision he hoped reflected an optimistic view of the company’s future, but he had no way of really knowing if it could be fulfilled. It was something to work toward, and so it was up to him to take that optimism and build off of it.

“Unless you have a very clear picture at the senior management level and you can articulate that to all your teammates everywhere around the world, you’re going to have a tough time propelling the team forward,” Shular says. “The team is not going to be able to embrace the types of changes you’re asking them to make. That very clear vision that is very well-articulated to every team member is fundamental to enabling and embracing the type of changes that have to happen.”

Shular firmly latched onto that optimism and hoped his employees, who he prefers to call teammates, would join with him and do the same.

Lay it all out there

Shular needed to make it clear to his leadership team how deep the company had sunk and he had to do that before he could move forward with his recovery plan. In that situation, you really can’t afford to sugarcoat the truth.

“Do not hold anything back,” Shular says. “Give the team the exact, blunt, clear picture of your current reality. Here’s where your customers are. Here’s the quality of the product. Here’s what the balance sheet looks like. Here’s what your cash flow looks like. All the various metrics you use to drive your business. Here’s what we look like today and make very clear how that’s just not going to be able to continue. It’s not going to allow us to be successful.”

Shular didn’t stop at his leadership team. He wanted employees throughout the company and around the world to understand that the leadership team was not in denial about the need for change at GrafTech.

“So when someone in South Africa or France or Brazil goes home at night and their spouse says, ‘Gee, what was your day like? What’s going on in the company,’ that individual can articulate the current reality,’” Shular says. “Here’s what it looks like.”

As the cuts were announced, the climate at GrafTech was quite bleak. It was a necessary condition, but not one that Shular wanted to persist for too long. He needed to act with compassion, but also with a bit of urgency.

“If you continue to roll those out over a period of time, you’re going to get a team that is constantly looking over their shoulders,” Shular says. “What’s going to happen next? When is it me? When is it my family? So another very important part of any turnaround is to the maximum extent possible, lay out your plan and roll it out all at once.”

Shular wanted people to understand where the company was and the steps he was now forced to take. But he also wanted them to see a picture of where he felt the company could get to in its recovery.

“What we told everyone was that this was what we have to get done,” Shular says. “If we can get this done, and it will take months and in some cases a couple years to execute on all these, then we have a very good shot of getting to our vision.”

When you’re in a situation where you’re making significant cuts, you’ve got to keep the plan in everyone’s mind. The idea that they might lose their job doesn’t fade easily from the mind of your employees.

“You’re going to have to continue to overarticulate the vision and articulate where you are on the milestones,” Shular says. “Having some short-term milestones where the team can be successful and acknowledging them, highlighting them and celebrating them will help the team toward more of a view forward.”

It’s those little victories that can start the momentum you need to achieve bigger victories, or at least instill a little more confidence in your people.

“Preferably, they are some shorter-term milestones where the team can start to see two months from kickoff, ‘Oh, look what we did,’” Shular says. “So you’ve got to have some near-term successes that you believe you can knock off early in that game to continue to build the confidence in the team. Then you have to celebrate the hell out of those successes. Highlight them, celebrate them, have fun. If you don’t have fun in a turnaround, you’re going to lose a lot of people.”

Get in front of people

Shular couldn’t meet with every one of his employees around the world in the time period he needed to.

So he had to make the visits he could make really count and then rely on technology to fill in the gaps to ensure everybody had a clear idea of the direction he wanted to take. To that end, it wasn’t just meeting with top management at each location and having a catered lunch in the executive conference room when Shular arrived in town.

He wanted to interact with as many people as he could at the locations he visited, even it took all day and night.

“Don’t go in and just meet the day shift,” Shular says. “There are two other shifts. The other two shifts are going to get the message with or without you and I think it’s much better if they hear the message directly from the CEO. I have found that there is nothing more powerful than being on the third shift as the CEO is on the plant floor conducting a town hall.”

If you don’t have second and third shifts, the philosophy still applies. You’ve got to meet with people from throughout your company if you want them to believe that you value their place in the organization.

“Walk the plant floor and spend time with the operators, the men and women who actually make the products and provide services to the customer,” Shular says.

Take the time to field questions and do it with an attitude of patience, not one that conveys a feeling of being late for your next appointment.

“It gives you some direct feedback on maybe how the message is not coming through clearly or is not playing clearly in these countries,” Shular says. “They misinterpreted it. It lets you see that and get it rectified.”

One aspect that you might overlook in delivering information to your people is the mode of travel that you use to get to those meetings. At a time when someone’s good friend at the plant or in the office has been laid off, first-class airfare and fancy rental cars can easily become an example of insensitivity on your part.

“Everybody flies economy,” Shular says. “When you’re in a facility asking them and challenging them to drive continuous improvement every day, whether it’s productivity, quality, on-time delivery, inventory turns, it’s important that not only the CEO, but the entire leadership team walk that talk. So for the CEO to pull up in a big full-size rental car, that doesn’t work for us. I’m going to be in the cheapest, smallest car I can get. I’m going to arrive in economy. You’d be surprised how clear those messages trickle through the entire team.”

To help drive that message home, Shular instituted a policy where no one, himself included, would fly anything other than economy no matter how far or long their flight might be.

“Because of our global network and all the travel we have, for us, that was over a $6 million savings a year to get everybody in economy,” says Shular, who says he flies about 150,000 miles a year.

If you’re trying to balance the cost of travel with the importance of face-to-face communication, Shular says look at what you’re trying to gain from the trip and think about the message you want to convey to your people.
You can’t be ruled by cost but you also can’t be limited by it if it could help your business. It’s often a tricky line to navigate.

“Are we growing customers? Are we taking care of customers? Are we penetrating new markets? Is it going to allow us to be more successful in the future? Is it going to drive cash flow and profitability?” Shular says.

“As a business person, we would weigh those kinds of decisions all the time. We are very careful not to get to a place where we’re so driven by cost that we lose the view and drive toward what is propelling growth. Propelling profitable growth is our No. 1 mission. So the day that we let cost become the decider or the overriding decider, we won’t be in a good place.”

Focus on family

Shular hoped to instill optimism with his people at the same time he was delivering bad news through his approach, particularly with pay cuts.

“We cut salaries, but what we did was all that money that was cut, we put it into our global bonus plan,” Shular says. “What we said to the team was if we hit 1 ½ times target for that year’s goals, we’ll pay out all the bonus money plus all the salary money that had been cut. In addition, we said all the officers’ salaries, which were cut 10 percent, they can never get that money back. That will go into the pool and it will be paid out to all the other teammates if we hit 1 ½ times target.”

Shular wanted to show people that he wasn’t just slashing to reach a number and that things would never be the same again. He wanted to provide a sense of hope that if people worked hard, they would be rewarded for it.

He also wanted to show a sense of understanding that a recession and cutbacks are generally tougher on employees than they are on management.

“Significant portions of the management team cannot get any bonus unless the people get a bonus,” Shular says. “We don’t have a situation where the senior management team made a pretty nice bonus and the rest of the team got nothing or a very meager bonus. We all sit in exactly the same bonus pool and we all have the same metrics and we’re very much aligned. Having the right well-aligned incentive compensation program is very important to driving teamwork.”

As it turned out, his people did work hard and did earn that money back.

“The team that year hit 1.8 times target,” Shular says. “All that money, including the officers’ money, got paid out to all the teammates.”

If you show yourself to be an ally of entry-level employees and middle management as well as top management and the leadership team, you’ll fare a lot better earning support for the things you want to do. And you’ll probably find the results are better too.

Shular recalls something one of the employees said at a meeting he had with the third shift at a plant that GrafTech had acquired as part of its turnaround.

“He stands up and says, ‘Gee Craig, do you think we could get our fishing competition back?’” Shular says. “And I say, ‘Fishing competition? How is that work? What’s that all about?’”

Shular discovered that employees at this location at one time had an annual redfish competition that had become a company event. The previous owner had let the event fade away, and Shular was being asked if he could help get it back on the calendar.

“I said, ‘As long as you invite me,’” Shular said with a chuckle. “And so we reorganized and reinstituted it. It was last October. We have 150 teammates at that site and 78 joined the competition over a weekend. … It’s important that leadership drive fun. Work should be a fun process. When you think about it, we spend a majority of our time at work. In my view, the only reason we all work is for our families. If you don’t believe that, look at any individual that gets a promotion or a success at work or accomplishes a hard-fought goal. The first person they call is somebody back home. So we’re all here because of our family.”

Keep driving forward

One area that wasn’t touched during the company’s recovery was research and development.

“In fact, we grew R&D,” Shular says. “It was so paramount to us that we would have to invest in R&D and spend a lot of time on innovation that we moved our global headquarters here to Parma to be right next door and under the same roof as our R&D operation.”

The relocation of headquarters, along with the acquisition of several companies that broadened the expertise and capability of GrafTech, was evidence that the company wasn’t just looking to recover, but that it was looking to continue growing.

GrafTech had made some significant strides. The banks were looking at the company much more fondly and the company’s market cap had jumped to $3.2 billion.

But Shular was already thinking about the next downturn and what could be done to lessen the blow it and keep the growth momentum going.

“We knew a recession was going to come eventually, they always do,” Shular says. “I don’t think anyone knew when, but one of our mantras each day was, ‘We’re a day closer to the next recession.’ So we didn’t want complacency to fall into the company. We had done a great turnaround and everyone was patting us on the back. We didn’t want to fall into the usual trap of, ‘Hey, we’re pretty good.’ So we kept a mantra that we need more new product development, more patents, more innovation and continued relentless drive on cost structure and productivity.”

The next recession did come, of course, and it was a big one. Net sales took a dive from $1.2 billion in 2008 to $659 million in 2009. But sales got back over the $1 billion mark in 2010 and GrafTech reached $1.32 billion in 2011 with a market cap of $1.9 billion. 

The company is also back up to 3,181 employees.

“Today, we sit with almost 800 patents and patent-pending operations, one of the largest in our space,” Shular says.

“So that’s the turnaround, that’s building a spectacular balance sheet and that’s having a great balance sheet and a great team that is very, very nimble in the trough and can still play offense. So we expect as these economies continue to recover to emerge with a bigger, better and stronger business model and be the clear low-cost producer in our industry with a lot more science, technology and patents than when we entered this recession.”

How to reach: GrafTech International Ltd., (216) 676-2000 or www.graftech.com

Takeaways: Be honest about your problems. Consider costs. Always prepare for the next recession.