Weathering the storm

 Jeffrey Stoops was facing a crisis.

His company, SBA Communications Corp., was in such financial trouble that advisers were pointing to bankruptcy as the only course of action for the owner and operator of cell towers.

Investors in the industry had started to focus on free cash flow, so wireless carriers slowed their expansion. SBA, which had been rapidly expanding to keep up with industry demand, was suddenly left with a lot of towers, decreasing demand and no cash flow.

“Everybody was advising us there was no way out —you had to go ahead and file Chapter 11, reorganize your debts,” says Stoops, president and CEO. “There were five public tower companies at that time. Two had already done exactly that. People were pointing to that and saying, ‘See, this is how it works. Do that, and everything will be easier going forward.’

“We just didn’t think that was the right way to go, so we didn’t. We were fortunate to find a separate solution.”

The situation required extreme measures. Stoops pared the work force of 1,500 to 400 and sold about 20 percent of the company’s towers to raise cash.

The company survived the crisis because Stoops continued to hold to a business philosophy he calls his moral compass, communicated with his employees openly and honestly, and stayed true to his business plan.

“Our deep-seated driver at that time was, you don’t go bankrupt unless you absolutely have to,” he says. “You don’t wipe out your shareholders, even if management can stay on and continue with the company. You never ,ever go through Chapter 11 if you can avoid it. That’s just a deep-seated part of my beliefs and culture here that the rest of the team fully signed on to.”

Using a compass to find your way
Stoops’ moral compass is a combination of principles and questions with which he runs the company.

“Honesty and integrity are right at the top,” Stoops says. “Those are things that we believe are essential to running a good business. We took a broad approach, a more holistic approach of the things that matter to us as operators and managers of the company.

“We have a set of guiding principles and a mission statement that we developed several years ago. We have it on posters. We hang it around the office and we continue to use those guiding principles to lead us and shape that compass.”

Stoops needed those principles to navigate through the changes in the industry that left the company troubled in 2002 and 2003. The focus on cash flow put the company in a serious financial bind.

“We were looking at a situation where we were really looking at hitting the wall because we couldn’t get any banks or other financiers to deal with us,” says Stoops.

Despite the challenges brought on by the evolving industry, Stoops stuck to his philosophy and made decisions on how to run the company based on his moral compass.

To find his way, he asked the most important question: What is best for the shareholders? When people were pressing him to declare bankruptcy, gather the remnants of the company and move on, he turned to that question to find the solution.

“These were personal decisions,” he says. “I would think every company, whether they write it in their mission statement or not, wants to avoid bankruptcy. It came as a more deep-seated understanding of, ‘We’re here to serve our shareholders, and what is the right thing for our shareholders.’

“It wasn’t, ‘What’s right for our employees?’ It wasn’t, ‘What’s right for the management team?’ It wasn’t ‘What’s right for our customers?’ I say that now as if it was black and white. It’s never that black and white. All those were valid questions. We have to take into account all those constituents in everything we do, but ultimately, when there was a conflict that arose between what was right for the employees or the management team or the shareholders, you always had to do what was right for the shareholders.”

Every executive needs to answer those key questions for his or her company. Stoops says it’s not difficult to develop a philosophy, and it makes solutions to those difficult decisions much more apparent.

“Sit back and take a clean sheet of paper and write down the five or six broad attributes of the company that they want to run, and when you do that exercise, it will become very clear,” says Stoops. “People will get very comfortable quickly with the parameters of that compass. A lot of it comes back to good old-fashioned common sense and good relationships to dealing with others. Our guiding principles are not really that specialized. It’s honesty, it’s integrity, it’s hard work, good work ethic, respect for others and have fun.

“When you get into a particular question that may seem confusing or may have various different outcomes, pull out your guiding principles to refresh your thinking on what is your most important constituency, and it actually allows you to solve those conflicts and questions much more easily.”

Communication
When Stoops laid off 1,100 employees and sold 800 towers, it created the type of environment where rumors and misinformation can cripple a company’s efforts to move forward.

Stoops says the key to avoiding this was communication.

“You have to communicate clearly,” says Stoops. “You have to portray yourself with a high degree of honesty and integrity. You may not know all the answers, but that’s not the time to be making them up.

“It is much more of an art than a science. We try to communicate as quickly, as clearly and as promptly as we can. In some cases, we can’t do that. We are very careful about saying what we can but not providing any false ray of hope or language that could be later construed as ambiguous. It’s very much a team effort that involves our human resources group, our investor relations group, and we do pride ourselves on clear and simple communications. Our style there has been one of being straightforward and blunt, even if it hurts.”

Stoops held a series of town hall meetings to address employee concerns during the crisis.

“When we didn’t know what the future would bring, we told the employees that,” Stoops says. “We found that was more reassuring than not. What people wanted was honesty and credibility. Some managers underestimate the intelligence of their employees, even down to the lowest level. People are pretty smart, and they can figure things out. You need to treat them as such.

“Be honest and open with them. Give them what you can. For a year or two, we held compensation absolutely flat, but we tried to make up for it with more flexible work hours and more fun around the office.”

It’s a delicate balance executives must manage when they talk with their employees and customers, but honesty is key.

“There are going to be questions where it is OK for the CEO to say, ‘I don’t know the answer to that,’” he says. “It creates in the mind of the employee that they have a leader of very high honesty and integrity who is going to work for them really hard.

“I think to try and create and perpetuate a vision of the CEO as all-knowing and infallible, then you’re not giving credit for the intelligence of the employees, because they’re all smart enough to know nobody knows everything. The all-knowing CEO who knows the answer to every question is vastly underestimating the intelligence of his work force.”

Stick to the plan
Even during the company’s dire financial difficulties, Stoops remained steadfast.

“Our strategy has been very consistent since Day One,” he says. “The things that we can control are what we focus on: execution, keeping our people sharp and motivated. That is a big challenge always in business, but particularly in our business, where strategies don’t change and it’s all about execution and doing what you did yesterday, but doing it a little bit better today and even better tomorrow.”

Stoops constantly benchmarks where the company is today in comparison to the previous week, month or year.

“We track, measure, evaluate, adjust and repeat,” says Stoops. “We keep repeating the cycle.”

For example, the company tracks same-tower revenue growth, cash flow and revenue growth, and compares those figures to the industry averages.

Stoops shares that information with employees, which helps them develop a team approach and a competitive attitude. Whether it is the day-to-day operations or when the company was struggling to survive, decision-making and planning start with measuring.

“We were able to script out fairly precisely the plan that we needed to adhere to during this period of time,” Stoops says. “It involved letting some people go. That was easy to track. It was reducing our expenditures and hitting our target expenditure levels. That was easy to track.”

Sticking to the plan made sense. Even during the downsizing, the company was increasing the amount of money coming in.

“It was interesting because all during this period of this time, the business was growing,” Stoops says. “It just wasn’t growing fast enough to keep up with the debt burn.”

The business plan didn’t change, but it did get put on hold.

“We just downsized and stopped investing in new assets for a period of time,” Stoops says. “That was probably much easier to control and get everybody on board with than a wholesale change in our business, which we did not have to do. We just had to downsize just a bit.”

The focus has since shifted back to increasing SBA’s presence.

“We’re constantly in the business of adding good assets to the company,” Stoops says. “It’s a core part of our strategy, so we stay constantly in the mix of opportunities. We don’t buy everything because there are price issues and quality issues. But if it fits our checklist, we are interested in acquiring it or building it.”

A checklist for new assets is another way of tracking and measuring quality against the company’s plan.

“It’s very lengthy; it’s very detailed,” Stoops says. “It gets to all aspects of the quality of towers that we’re looking at, the competitive landscape for those towers, our viewers of the geography of where they’re located — is it a high-growth area or not such a high-growth area,” Stoops says. “We have a two-page checklist.

“It was developed over the years, starting all the way back when we bought our first tower in 1997. It’s a living and breathing document that gets changed and modified as necessary, as we get smarter every day.”

Stoops’ strategies have paid off. The company went from a $53.8 million loss from continuing operations to $4.2 million in income from continuing operations between 2003 and 2005. Revenue in that same time period increased from $192.1 million to $260 million, and Stoops expects that to reach the $350 million mark this year.

“Our success here is we have developed a very good business plan, a good strategy,” Stoops says. “We’ve stuck with it. We continue to constantly challenge it, reanalyze it, change it if necessary. We haven’t found the need to change it much. Then (we) just continue to measure analyze, adjust and watch the overall market trends, up or down, which will be the ultimate governor and guide for what we do with our excess cash. We’ve kind of got it down to a very manageable and predictable system.”

HOW TO REACH: SBA Communications Corp., (800) 487-7483 or www.sbasite.com

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