All posts by : Stan Silverman

Article originally published in the Philadelphia Business Journal on May 4, 2015

Attending the grand opening of the Saxbys cafe April 13 on Drexel University’s campus was a unique event. What made it unique is that the cafe is entirely managed and operated by Drexel undergraduate students. It has a different feel than its well-known competitor in the coffee business. The atmosphere is “millennial trendy” – from the decor, to the background music, to the willingness of the Saxby team members to engage in friendly conversation with customers, who are referred to within the Saxby culture as guests. There is no doubt that this Saxbys cafe will be a huge hit with the students on Drexel’s campus.

Nick Bayer, the CEO of Saxbys Coffee, hosted the grand opening along with two key Drexel leaders who helped make this student managed and operated cafe a reality – President John A. Fry and founding dean of the Close School of Entrepreneurship Donna De Carolis. Congressman Chaka Fattah was also present to help celebrate the grand opening. I was so impressed with Bayer’s focus on creating a great customer experience that I interviewed him to learn more about his leadership philosophy and his focus on his team members and guests.

I asked Bayer why he decided to pursue the idea of having a Saxbys cafe managed and operated by college students. He said, “I saw college students who were looking for entrepreneurial opportunities, I saw colleges embracing entrepreneurship, and I felt that I wanted to provide the experiential component.”

Bayer chose Drexel for this Saxbys’ cafe because of the University’s reputation for being on the forefront of innovation and entrepreneurship. Bayer said that he received great support from the University on choosing the right location for the Saxbys cafe – a corner that borders the academic and residential part of Drexel’s campus that is passed by over a thousand students each day walking to and from class.

Bayer feels that Saxbys’ culture is the most important determinant of his company’s success. I asked Bayer, “How do you differentiate Saxbys – why do customers come to your cafes and buy coffee?” He said, “We compete on people, not on product. Most people think that we are in the product business – we are actually in the people business. I realized that I can compete [with other companies] on people and on hospitality. People are at the core of what we do – our team members and guests.”

Bayer continued, “I thought that if you take people who are smart, passionate and prideful, and give them the tools and wide enough boundaries, good things could happen. I want this to be a place where people want to work. Our culture is defined by our people not by a product.”

Bayer and his senior leadership team give significant support to their cafe managers. He said, “I personally am an absolute zealot of the mentality of ‘servant leadership.’ Organizations work best when they are upside down. Our cafe managers are the CEOs of the businesses. All the people at headquarters exist to serve our cafe managers and their teams. We are here to help them to be better at their jobs. My expectation of them is to be servant leaders to the members of their teams. Their job is to make life better for their guests every single day.”

On the subject of empowerment, Bayer said, “We hire people with good critical judgment and empower them to make decisions. Other employers take power away from their employees. I don’t want to get in the way. I want my people making decisions. I hire people who will develop a sense of ownership in their business.”

The first manager of Drexel’s Saxbys cafe was Meghan Regan, a pre-junior on a six-month co-op work assignment. After being trained as a manager at other Saxbys locations, she assumed her role as manager of the Drexel cafe while it was being constructed. She was responsible for marketing and promotion of the cafe and hiring the staff – all part-time Drexel students.

I asked Regan what she thought about the culture of Saxbys. She stated, “I think the culture is amazing. Every Saxbys I worked at [during my training] felt like home. People come first. Team members are friendly with their guests and get to know their names.” Regan said, “Guests don’t mind waiting in line for 20 minutes. We apologize and give them a free drink card or ask if we can get them a cookie to enjoy while they wait. We ask them how their day is going … we don’t want them to be bored while waiting in line.”

Kelsey Goslin, another pre-junior on her co-op work assignment, followed Regan as the second cafe manager of the Saxbys at Drexel. I asked Goslin what traits she looks for when hiring team members. She said, “Saxbys looks for people who are outgoing, detail oriented and disciplined, a core value of Saxbys. People come back for that atmosphere and want to interact with the team members who work there. We want to hire people who are positive in their outlook and are hard working.”

Goslin stated that as a co-op student, she had the same decision-making authority and was held to the same metrics as any other Saxbys cafe manager. Goslin feels that the management experience she is gaining as a college student is invaluable to her future career, and will differentiate her among other job seekers in the market.

Bayer’s leadership philosophy is somewhat different than that of the franchisee of the Popeyes restaurant in Channelview, Texas that I wrote about last week. Bayer’s philosophy however, is the same as we adopted when I was CEO of PQ Corporation, a capital-intensive manufacturing business. It guided our approach to continuous improvement and how we helped our customers be successful in their businesses, with great results.

So, what are the takeaways on how to build your business and differentiate it from the competition, regardless of the business that you are in? Hire people with strong interpersonal skills and with good critical judgment, empower them, and create a culture where the focus is on creating a great customer experience. Treat employees and guests, customers and clients like you would like to be treated. Lead employees like you would like to be led. The businesses that adopt these principles are the ones that will excel.

Stanley W. Silverman is a writer, speaker and advisor on effective leadership, and serves as the leadership catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on April 27, 2015

Columnists who write about effective leadership occasionally learn of an outrageous news story in which the principles that they write about are violated – an organizational culture that values employees, avoids reputational risk and values the exercise of good critical judgment by its leaders.

Last week, it was reported that a pregnant employee working as a manager for a Popeyes restaurant in Channelview, Texas, was fired because she refused to reimburse the restaurant for $400 taken in a robbery, during which she was held at gunpoint. The franchise owner of the restaurant claimed the employee violated policy by keeping too much cash in the register. She stated that it was a very busy day at the restaurant, and that “she had moved the money as fast as she could.”

So, she loses her job because she was doing her job – serving her customers on a very busy day, and taking in lots of cash due to high sales volume. One of my editors who works part-time in a restaurant once had a conversation with the owner about the culture he wants to cultivate in his organization. He stated, “I don’t own this restaurant. The customers and employees do.” How true – a sign of an effective leader.

After the news story went viral, Z & H Foods, owner of the restaurant, issued the obligatory apology, gave the fired employee back pay and offered her job back. Her response was that she is not sure she wants to work for this owner again. No one would blame her for feeling this way.

My first reaction after reading this story was that you can’t make this stuff up. Unfortunately, these types of situations occur all too often. Let’s take a look at three elements of the organizational culture that lead companies on a journey towards preeminence, and violated by this Popeyes franchisee:

Valuing employees

Restaurants are in the people business – hiring the right people to serve customers. Restaurants on a journey towards preeminence strive to provide a great customer experience, which gives them a significant competitive advantage and attracts lots of customers. To be successful on this journey, restaurants need to attract the best people, and treat them as valued employees, not disrespect them.

Asking the Popeyes employee to reimburse the restaurant for the stolen $400 was insulting and disrespectful. How does the franchise owner expect to hire great people to staff his restaurant when it becomes known that this is the way he treats his employees? Great employees treat their customers in a way that encourages them to return to the restaurant. Employees will not act in this way towards customers if they are disrespected by their managers and are not happy employees.

After reading the news story, one wonders the degree to which the employees at this Popeyes restaurant trust the restaurant owner and are loyal to him, are empowered to make decisions and feel a sense of ownership in what they do. This is the type of organization that people want to work in and develop professionally. One gets the sense that the Channelview Popeyes restaurant is not that type of organization.

Avoiding reputational risk

In today’s world of social media, a reputation built over the years can be tarnished in minutes. Perhaps the Channelview Popeyes owner did not realize that blaming and then punishing his employee would generate such a negative response on social media. Not only did he embarrass himself and his own restaurant, he embarrassed all restaurants within the Popeyes chain.

The CEO of Popeyes Corporation needs to establish the right organizational culture, and ensure that all franchisees embrace it down through their respective organizations. The front line employees that serve customers day in and day out are key to the success of the company. Popeyes’ reputation rides on the customer experience that these employees provide.

Exercising good critical judgment

It is obvious that this Popeyes franchisee did not exercise good critical judgment when he fired the employee. One of the most important attributes to look for when bringing on a franchisee and when hiring employees is to ensure they will exercise good critical judgment. When a decision is not clear cut, individuals with good critical judgment will tend to make the right decision.

People with good critical judgment and a sense of self-confidence will violate company policy in the rare instance when the decision will save the company money or protect its reputation. When this occurs, these employees should be celebrated.

What can all leaders learn from this unfortunate event at the Popeyes restaurant in Channelview, Texas? Establish a strong culture throughout your organization that respects employees. Empower them to make decisions. Protect the company’s reputation. Associate yourself and hire people with good critical judgement. The success of your business depends on it.

Stan Silverman is a writer, speaker and advisor on effective leadership. He serves as the leadership catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on April 20, 2015

Last week, the Veterans Affairs Inspector General issued a damming 78-page report on an investigation started 10 months ago into the operation of the Philadelphia office of Veterans Affairs. The types of problems identified in this report were consistent with those found in other VA offices across the country that were made public last year.

Nine months ago, Robert McDonald, the former chairman and CEO of Procter & Gamble and a successful leader from the private sector, was unanimously confirmed by the Senate as the new secretary of Veterans Affairs to fix the widespread failures of his predecessors and to improve the customer experience of our veterans when dealing with the VA.

The Inspector General’s report on the VA Philadelphia office indicated that among other issues, over 31,000 inquiries by veterans to the Philadelphia call center went unanswered for an average of 312 days, records were falsified regarding the backlog of claims, quality reviews were altered and staff received credit for uncompleted training. Serious instances of mismanagement and employees’ mistrust of VA managers were uncovered. Our veterans deserve better than this.

Allison Hickey, the VA’s under secretary for benefits, has indicated that management and other changes have already been made at the Philadelphia VA office to improve operations and the level of service to veterans, and that the Inspector General’s report identified issues prior to these improvements.

Let’s go back prior to the confirmation of McDonald as the new VA secretary and prior to the management, system improvements and cultural changes he is implementing, and ask: Why was the VA mired in disarray? Let’s compare the difference between private sector companies and government organizations.

Companies operating in the private sector, whether they are publically or privately owned, need to provide a return to their shareholders. Most operate in a competitive environment. The more effectively the leaders of private sector companies operate their businesses and delight their customers, the higher the return to shareholders. Great companies strive to reach a level of preeminent customer experience, which differentiates them from competition and permits these companies to grow their market share because customers want to deal with them.

To experience a preeminent customer experience, all one has to do is visit an Apple Store. In addition to being driven by the need to provide a return to shareholders and the need to compete in the marketplace, Apple had one advantage that is rare with other companies – the visionary leadership of someone like Steve Jobs, who created a preeminent customer experience culture.

The senior leadership teams of successful private sector companies focus on tone at the top and nurturing the right institutional culture, as well as hiring and developing the most effective leaders who engender the trust of their employees. These leaders create an environment in which their employees develop a sense of ownership in what they do, and they inspire their employees to achieve great results.

Effective leaders encourage their employees to break their paradigms, embrace the philosophy of continuous improvement and empower their employees to pursue these improvements. The most successful private sector companies strive to be the best in the world at what they do, a journey that never ends. This is what the VA needs to do.

The VA and other government organizations, however, do not have stockholders which hold management accountable for generating great results, and do not have competition driving them to continually improve their operations and how they treat their customers. Most leaders of government organizations do not get the type of training or experience that leaders get in the private sector, and are not exposed to the mindset of leading private sector companies.

As secretary of Veterans Affairs, McDonald has a huge job ahead of him. He needs to bring to the VA a mindset that private sector companies have that drive the journey to preeminence, without having the imperatives of meeting stockholder expectations and going up against competition. Not only does he need to fix the current issues facing the VA, but also to understand which managers need to be replaced, introduce and change attitudes, and nurture a new culture at the VA. This will take time. Our veterans as well as anyone else who deals with the VA deserve a preeminent customer experience.

Stan Silverman is a writer, speaker and advisor on effective leadership, and serves as the Leadership Catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on April 16, 2015

The CEOs of many public companies raise their guard when they receive a phone call from an activist investor wanting to discuss how a company can improve its performance and shareholder return. This is not necessarily the right reaction.

Activists invest in underperforming companies and push for improved shareholder return through cost reduction, a change in business strategy, a leadership change or the pursuit of strategic options. If shareholder return cannot be improved through other means, the activist might push for outright sale of the company or one or more of its operating units.
If unsuccessful in convincing the CEO and board to implement their proposals to increase shareholder return, an activist may pursue one or more board seats, and threaten a proxy fight to seat their own director slate. All outside directors have a fiduciary duty to be independent, even if nominated by an activist and seated through a proxy fight. These directors need to make their own independent decisions based on what is best for the shareholders after board deliberation, not what is best for the activist who nominated them.

Some activists are interested only in making a quick return, with no interest in the potential of a company to generate much higher returns for its shareholders over the long term. This adds to the pressure of companies to sacrifice the long term in favor of shorter-term quarterly results. The interests of short-term oriented activists may not be in the best interests of most of the company’s shareholders. Other activists are in it for the long term as are many shareholders, and their proposals need to be heard and if valid, seriously considered.

Dealing with activists who are adversarial is a distraction to the CEO and to the board, and takes time and focus away from the business. A proxy fight impacts the CEO’s reputation as well as that of the board. So, how do you lessen the likelihood that your company becomes an activist target?

Article originally published in the Philadelphia Business Journal on April 6, 2015

When boards evaluate the annual performance of their CEOs, the areas assessed are most often focused on those metrics that drive shareholder value, such as growth in revenues, cash flow and earnings, as well as annual and multi-year operational and strategic goals. Goals are established by the board and their CEO at the beginning of the year, and at the end of the year, results are measured against those established goals.

Evaluated less often are leadership traits of the CEO. Unlike performance against numerical goals, these are more subjective and harder to assess, but very important to the long-term success of the company. The assessment of the following traits should be part of every CEO performance review:

Establishes a clear vision and mission for the organization

If you don’t know where you are going, you can’t get there, and without a clear vision and mission, the long-term goals of operating and staff units down through the organization will not be aligned. The process of establishing a clear vision and mission is just as important. CEOs should be evaluated on the extent to which they involve their senior leadership team, so the team develops a sense of ownership and commitment to the vision and mission, and they know what roles they play in achieving them. Just as important, the senior leadership team can communicate this role down through their respective units.

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