Tugboat Institute @O.C. Tanner: Let's Get a Little Better Every Day
O.C. Tanner was founded on the twin pillars of beauty and kindness, and both were abundantly in evidence last week at Tugboat Institute® @O.C. Tanner, in Salt Lake City. With nearly 100 Evergreen® CEOs gathered in person, and more joining us virtually, O.C. Tanner CEO Dave Petersen and his executive team invited us in for a close look at their extraordinary Evergreen company. It was a wonderful three days of learning, connection, and celebration.
An exemplar of all things Evergreen, but none more than People First, O.C. Tanner was an exceptional host. People First is not only the foundation of their culture and philosophy, but it is also literally their business.
O.C. Tanner was founded in 1927 by Obert Clark (O.C.) Tanner. A philosophy professor at the University of Utah, Obert believed deeply in the dignity and worth of people. The importance of employee recognition and celebration was far from a commonly accepted notion at the time, but Obert intuited its value and became an early champion, both in practice and by trade.
Obert got his start selling seminary graduation pins and class rings, part-time, working out of the back of his car. In its first 43 years, his company grew from $0 to $12M in revenues, making rings, celebratory pins and, eventually, employee service awards. Guided by his dedication to beauty and kindness as well as his commitment to creating a superior product, O.C. developed the motto that is still often repeated today; “let’s get a little better every day.”
For the next 30 years, the company evolved and grew, creating new service awards programs and extending their offerings to include recognition awards. During this time the company expanded significantly, in terms of revenue, products and services, and number of employees.
The past 20 years, under Dave Petersen’s leadership as President and then CEO, have marked the greatest period of innovation the company has known thus far, first by making the significant shift from being primarily a manufacturing company to becoming a leading software solutions company. They also built a state-of-the-art, automated distribution center to deliver complex product combinations right to the desk of the customer manager and, importantly, they created the O.C. Tanner Institute to advance the understanding of People First recognition and awards.
Today, O.C. Tanner serves over one thousand clients across 180 countries and delivers 5.3 million awards annually from offices in Salt Lake City, Canada, England, Singapore, Australia, and India. The company has been recognized as one of Fortune’s 100 Best Places to Work and was awarded the Shingo Prize for Excellence in Manufacturing. In spite of this enormous growth and innovation, O.C. Tanner remains a company and a community that is defined by the spirit and values of its founder, putting People First, pursuing beauty and kindness in all things, and staying private forever.
Our week of learning kicked off with a celebration on Tuesday evening, and on Wednesday morning, we dove into two days of workshops and presentations on-site at O.C. Tanner’s incredible Salt Lake City campus. Dave Whorton and Dave Petersen opened the two days with a Fireside Chat, in which they visited the history of the company, Dave Petersen’s personal journey to leadership, and how the Evergreen 7Ps® come to life at O.C. Tanner. Through the rest of the day and all of the following day, we were able to visit with and learn from key O.C. Tanner executives, who presented on topics ranging from Strategy Evolution, to Community Impact, to Corporate Governance, to the People First culture of O.C. Tanner. We also spent time with the Director of the O.C. Tanner Institute, who shared insights about the importance of culture to employee engagement and fulfillment, something that is critical to all Evergreen companies. Finally, we spent time each day in workshops, talking and thinking about some of the big issues we all face, including building thriving cultures in our organizations and planning for the future.
As unique, powerful, and important as it is, the value of gathering our tribe is not limited to the learning we all share when we come together. From the first evening, the energy and excitement at reconnecting with friends and peers was palpable. To honor the importance of these connections and friendships, in the evenings we celebrated our special community with two fantastic dinners, one of which was held at the Utah Olympic Park.
Standing at the top of the Olympic ski jump, many of us were humbled, struck by the courage, optimism, hard work, and tenacity it takes to become an Olympic athlete. A great many dream of it, some try for it, and only a few, extremely talented and dedicated individuals are able to make it a reality. In some ways, the same could be said of the Evergreen CEO; it is not an easy path, but when grounded in a deep belief in purpose, a willingness to work hard and stay in it for the long haul, and a steadfast dedication to making the world a better place, it can become a reality.
From Founder to G2: Two Distinct Mindsets
It takes a certain set of qualities to start a company and make it successful. It takes vision, grit, passion, and a willingness to take risks and put it all on the line. Yet, in order for a new business to settle into a place where it can become a true Evergreen® company and last for 100 years or more, a shift must eventually take place. This often occurs when leadership transitions, from Founder to successor, and it can be tricky. The bottom line is that a founder’s mentality is necessarily different from a second generation (G2) leader’s mentality. It has to be. So how does one make this transition as smooth as possible?
I am the G2 leader of Southway Builders. In some ways, my story is similar to a typical G2 leader in a family business, in that I was present from the very early days of the company, and I became the founder’s exit strategy early in my career with Southway. But at the same time, I am not a family member and so I have the intellectual and emotional distance that a son or a grandson might not have. In my story, therefore, I think there are learnings that can apply to many businesses, family or not.
The first significant difference between a founder and a successful G2 leader lies in the vision for the company. Southway’s founder, when he started the company in 1991, envisioned a solo operation that would allow him to enjoy the independence of working for himself. It quickly became clear that the company he was building not only could become bigger, but it would have to grow to stay alive in the industry.
At Southway, we are construction managers. We do not self-perform any of the construction trades, rather we plan and manage large construction projects. To stay relevant and compete in the Baltimore regional market, the founder quickly realized that he could not do it alone, so he brought me on board in 1993 as a Superintendent; I was employee #1. Although my beginnings were humble, I grew with the company, eventually transitioning into greater leadership roles. From the beginning I was interested in a stable career, supporting my growing family, and eventually having an ownership stake in the business. My goals were defined by opportunity, not limits. While I cannot say that my vision for Southway has been the same since day one, I’ve always been generally more interested in a bigger future for it than the founder.
Another significant difference was my orientation toward growth, both for myself and for the company. The founder of the company found his joy in estimating work, so as we grew, he never stopped doing that work, engaging in the other leadership aspects of the business when he had to. He loved working in the business, and that work gave him a good sense of self-worth. For me, this was an important learning opportunity, but it also led me to realize how much I had to learn. Therefore, once I had sat in most of the seats in the business, I began to look for opportunities to grow myself as a leader.
When I became President and majority owner in 2016, I took three steps that were significant in my growth as a leader. The first was reading Pat Lencioni’s The Advantage, which then led me to engage the Table Group (Lencioni’s business consulting group) to work with our team. By this time, we had grown to just over 50 employees, and it was clear to me that we – and I – needed more strategy to move us forward in a meaningful way. I was stressed and reading The Advantage helped me understand the source of my anxiety; it allowed me to see a path towards a more controlled future and grow as a leader. I started thinking in terms of processes, team dynamics, and systems instead of specific tasks, and we started working to build a healthy business. This was my first significant step away from the founder’s mentality and toward developing my own view for what the company could be.
Next, I engaged a leadership coach. Very soon after taking the reins, I was overcome by Imposter Syndrome, wondering who was asleep at the wheel, letting me take charge. I cannot overstate how important my coach was in helping me discover the best and most authentic leader within myself, giving me the gift of more purpose and clarity in my life.
For the last step, after my first year as President, I found myself wishing I could talk about some of the challenges I was facing with peers. I spent a year seeking out and creating a small group of construction peers whose companies were very similar in size and product type to Southway, but who worked in non-competing geographic markets. Coming together with these leaders was like catching lightening in a bottle for all of us; we are still extremely close, meet regularly, and rely on each other a great deal. The benefits were so apparent to each of us, that we opened our group to the senior levels of management in our companies. Now all four companies’ CFO’s, HR Directors, Operations heads, etc. get together on a regular basis to help and learn from one another.
All of this led me to what I would say is the last and perhaps most important difference between the founder’s relationship with the business and mine, as a G2 leader: a shift from focusing on the short-term, day-to-day concerns of the business to a long-term, big-picture mindset.
As I said, what our founder loved was working in the business, so he never really stopped doing that. He had a great run, but he was clear in explicitly saying, at the time of our transition, that he had no desire to run a larger business. In my early years as President, I was initially stuck in that place of working in the business too, acting more or less as our CFO in addition to my official duties as President. After all, that was the model under which I had learned. My Peer group and coach all challenged me to stop being the CFO, and I reluctantly acquiesced. I finally hired a CFO and that was the last piece in a puzzle that allowed me to lift my gaze up from the immediate. I could finally see with absolute clarity that, for the size of our operation, my work in the business was hindering our ability to function effectively. Soon thereafter, we started work with our leadership team to develop a long-term vision for the company and map out strategies and build platforms from which to grow the company. These steps are refining our systems and processes in a way that will secure a future for Southway Builders that will extend far beyond my own tenure.
I am the luckiest guy in the world because despite the difference between the founder’s vision for the company and the one I developed over time, there was never any tension between us at all. I think this is the point where some G2 leaders can encounter problems, because some founders may be less willing to release the original vision of what the company could become. It’s easy to understand how a founding leader who has grown a good business may believe their methods are the sole recipe for success in moving forward. Fortunately for me, that was never the case at Southway. The founder was extraordinarily graceful in allowing me the leeway to find my own path. He not only accepted, but he also expected my vision, strategy, and leadership to be different than his. And if you are wondering, the founder is still an owner in the company; he is fully retired but will maintain a minority stake for a few more years.
I could not have created Southway, and the founder could not have turned it into the company it is today – an Evergreen industry leader with almost 100 employees and a structure in place to grow thoughtfully and to last for 100 years or more. It needed us both, as does any company that hopes to survive beyond the first generation of leadership.
The First 401(k)
Today, the 401(k) is the standard for retirement savings in American companies of all sizes, industries, and ownership structures. Would it surprise you to learn that this has only been true for about 40 years? The very first 401(k) savings plan was created in 1980 by Ted Benna, an employee at the former parent company of Johnson, Kendall & Johnson (JKJ), the Johnson Companies. Benna’s pioneering plan was and remains one of the most important and wide-ranging People First developments across businesses nationwide.
In the 1980s, the Johnson Companies contained several divisions, the largest of which, Johnson Administrators, administered data for third parties on its considerable computer systems. A smaller division, Johnson Benna, did consulting on retirement plans. They mostly worked on non-qualified executive benefits plans for their clients, many of which were Fortune 500 companies.
As the legendary story goes, Benna was working one weekend, trying to figure out a structure for a client’s top executives to defer taxes on some of their significant cash bonus payments. He stumbled upon a piece of tax code that had existed for a couple years but that was not widely used – it was subsection k of section 401 of the code. 401(k) allowed for the tax-free deferral of dollars today to build income for the future. It did not specify whether the tax-free deferrals were limited to employees or not, nor did it apply to any specific income levels. It was not clear to Benna whether the IRS would allow for it to be used on a large scale, so he put the question to the IRS directly. They agreed with his interpretation and said they would allow it.
Although the code was written for use by high-income employees, Benna realized the opportunity for all employees. He drafted a plan and pitched it to his client, but they decided they were not interested in pioneering something so new and untested. At the risk of seeing it die before it got off the ground, Benna and company founder Ed Johnson decided that the only way they were going to get to test this was to deploy it in their own company, and so the first 401(k) was born.
I did not join the Johnson Companies until 1986, so I was not part of this pilot plan, but we have a woman who still works here at JKJ who was. She’s worked for Johnson since she was 18. Before joining the Johnson Companies, I did have a 401(k), starting in about 1984, which gives you an idea of how quickly this idea caught on and became mainstream.
Ted Benna did not create the 401(k). His genius was in discovering it and realizing its potential. As he pondered its possible usages, he saw that while the appeal might be great for high-income employees, it was going to be a harder sell to lower income workers, who would likely prefer to get all of their salary and bonuses up front. So, he came up with the part that represents his greatest innovation–the addition of employer matching contributions. The prospect of doubling your money as soon as you put it into your account was such an obvious win for employees at all income levels that they signed on in great numbers.
Because it had appeal to all employees in participating companies, all of a sudden, a whole sector of the workforce, who up until this time had put little thought into retirement savings, had cause and a structure to think about planning for their retirement. Aside from pensioned employees, who typically worked for government or state companies or who were union members, they had relied on savings accounts or on family to take care of them in their old age. With the advent and standardization of the 401(k), workers at every level suddenly gained the freedom, security, and dignity to plan for the retirement they wanted instead of scraping by as best they could manage. With life expectancies increasing, this was even more important than it had been in generations past.
The 401(k) has several distinct advantages over the pensions that were the standard before it was created. First, if employees start early, thanks to the employer contributions and the compounding effect over time, they can accumulate significant wealth. Second, the 401(k) has great portability, as compared to a pension. In a world where people change jobs much more frequently than they did in past generations, this is an enormous advantage. Finally, employees do not have to rely on employers to fund pensions; in principle, employers promised to fund them, but volatility, a few bad years, or other market forces could come along and wipe them out, and then employees would be out of luck. The 401(k) gives individuals control over their money and therefore control over their own lives.
The 401(k) is not a perfect tool. Nor did Ted Benna foresee how ubiquitous it would become. His initial intention was not to replace the Defined Benefit system for pensions; he wanted the 401(k) to be a supplement to it, to enhance retirement savings. He always expressed some regret that the 401(k) plans started a trend to replacing Defined Benefit plans versus enhancing them.
Today, the retirement savings landscape continues to evolve. For some small companies, we are learning that certain IRAs might be a better plan. In fact, Ted Benna is still helping companies design plans for their employees to save for retirement, and his current focus is on smaller companies who are often not best served by the plan he developed. But the extent to which Benna’s work revolutionized the way Americans think about saving for retirement has changed the conversation completely. The idea that all employees, and not just the top earners, can and should have the means to build security for their retirement may seem obvious to us today, but it was not at all just 40 years ago.
Here at JKJ we are extremely proud to be part of this history. As an Evergreen® company, when my partners and I bought out our division of the Johnson companies, we doubled down on the Evergreen mindset that Ed Johnson and Ted Benna intuited in so many ways. Our own 401(k) is an important part of how we take care of our employees, alongside our ESOP, through which we offer profit sharing. And we still work on creating and managing employee benefits and 401(k) plans for our clients. We are carrying forward Ted’s legacy and will always put taking care of our people at the center of what we do and who we are.
Are You Ahead of the Curve or Behind It?
As the adage goes, there is nothing more constant than change. As business leaders, we aim to drive change as we implement our vision and long-term strategies. If we plan thoughtfully and with intention, our purpose can give us more control over the ways we change, the pace of change, and the extent to which the changes create a competitive advantage for our companies. But sometimes, change is forced upon us by forces beyond our control, and we have to change in ways we would not necessarily have chosen. Insofar as we can see these forces coming, it is better to get out in front of them and chart your own path forward, rather than wait until you are pushed to change and have less control over the process.
So, let me ask you this: What are you doing about environmental sustainability?
At Greenfield Global, our vision and purpose are simple: “<350”. It’s on our t-shirts, it’s on our hardhats, it’s on posters throughout our offices, and it’s at the top of our minds when we make even the smallest decision. It represents our goal and our purpose – to do everything we can to help the earth return to CO2 levels below 350 parts per million in the atmosphere – the level required to return to equilibrium and sustain life on our planet for thousands of years to come. Therefore, our purpose is in tight alignment with the drive toward more sustainable life on earth with the products we make (biofuels, beverage and industrial alcohols, and solvents) and how we make them. But even companies whose direct purpose, enterprise, and identity are not directly tied to this initiative will soon be forced to think about the sustainability of their activities. Many already are.
Why? Because governments will tax carbon emissions, customers will demand lower carbon-intensive products, carbon-borders will be formed, our businesses will be impacted by the environmental consequences of climate change (floods, fires, droughts), and our children, grandchildren, and future generations will depend on it.
There is still time to ask the question, can we get out in front of this movement and drive our path forward, or will we be pushed in certain directions because of it? At Greenfield, we have been able to retain control by getting out in front of it and we have been able to create significant competitive advantages as a result.
Greenfield is the largest privately held ethanol producer in North America. We are one of the only companies that makes ethanol for the full range of products that contain it or require it for production, from fuel, to pharmaceuticals, to adhesives, to fragrances, to inks, to flavors, to hard seltzers and more. There are already regulations and mandates around reducing the carbon intensity score of fuel-grade ethanol, and of course we are doing that, but as of today, there are zero requirements in place to reduce the carbon intensity score of ethanol produced for other purposes. Because of our vision and our purpose, however, and because we expect it’s coming in the future, we are doing it anyway.
We have a plant in Chatham, Ontario, Canada where about 80% of the ethanol we make is high purity alcohol that goes into hard seltzers, vodkas, gins, flavors, pharmaceuticals and so on. Not one of the companies that buys our ethanol from this distillery has ever asked about our carbon intensity score. We saw an opportunity to lower it, however, and because it is right in line with our <350 mandate, we jumped on it.
When you produce ethanol, you separate corn into its three parts – protein, starch, and CO2. The starch is fermented with yeast to make ethanol, the protein is dried and made into meal for animal feed, and the CO2 is, typically, vented into the atmosphere. Because we hold all our initiatives and processes up to our <350 standard, we wondered if we might be able to find a better outlet for this excess carbon dioxide. Across the street from our plant, there is a large, 85-acre greenhouse for growing tomatoes. We all learned about photosynthesis in school; plants need CO2 to photosynthesize and release oxygen. Why not send our CO2 over there? In cooperation with the Canadian government and the greenhouse owners, we embarked on a project to design and build a system that would capture and send not only our CO2, but also the excess heat generated by our plant, across the street to the greenhouse.
Despite our partnerships and several grants we received, this initiative was expensive and a lot of work. It certainly would have been cheaper and easier to continue to vent the CO2, like other ethanol plants continue to do. We were not under any pressure at all to make this change, but we believe it was the right thing to do, and now we have the further advantage of having created something that can serve as a model for future projects. Since we built the system, the greenhouse has been able to secure grants to expand its operation and soon we will be able to send them even more of our CO2! It’s a win for us, a win for them, and a win for the planet.
Outside of ethanol, we have also turned our attention to green hydrogen, green methanol, and renewable natural gas. Very few companies are producing these critical products currently, and there isn’t even a market price for these sustainable commodities. But we know there will be, and we will, again, be ahead of the curve.
It has not always been an easy decision to strike out in these new directions. The engineering is very challenging, getting customers, investors and government on board is time-consuming, and even convincing some board members can be difficult. But when we remind them that we have a set of core competencies that are transferrable and that allow us to be pioneers in this work, the rest becomes execution. This important work is in line with our mission and our vision, and it will set us up to be leaders in the new low carbon markets that are certain to arrive in the near future.
The bottom line here is twofold. First, decarbonization is not a fad. It is going to shape businesses, across all industries, in the coming years and decades. As Evergreen® leaders, we lead multi-generational, private companies. Whether your purpose includes environmental sustainability or not, we have an opportunity to take the lead in decarbonization and, for now, report to ourselves on those achievements. We don’t have to report to public shareholders who prioritize short-term profits over long-term success or compare us to competitors that yield larger dividends or share buybacks. With this flexibility, we are well-positioned to lead the charge and take our places as industry leaders in sustainability when the mandates come and when customers demand it. And second, if we are truly thinking about being multi-generational, if we are looking at our families benefitting from these great companies we have built, we have to be ahead of the curve and not behind it. We know what happens to companies that fall behind the curve.
All businesses are going to be challenged by climate change and the need to decarbonize across industries–supply chains, feedstocks, commodity prices, reporting requirements, customer demand, regulatory burdens, raw material availability, etc. No matter our industry or the orientation of our purpose, it’s time to get plans in place and execute.
Modern Leader
This article draws heavily on JeVon McCormick’s recent book, Modern Leader, published in July 2022.
Can you be a leader if you are following a well-worn playbook? Doesn’t that make you a follower? Further, what if that playbook is broken? For too long, in education, in business, and in society, we have been following a playbook that is indeed broken. The good news for leaders of companies is, stepping outside of it is not only the best way to right the wrongs it perpetuates, but also a fantastic way to reap the benefits of a larger and better pool of applicants for your company. It is the only way to lead us into the future.
Before we continue, I want to clarify that I think any discussion of blame must be laid aside. The question of fault gets us nowhere. But we must agree that although it may not be our fault that the system is broken, it is certainly our responsibility to fix it.
The essential problem with the playbook we have been following, specifically as leaders of businesses, is that it leaves no space for an enormous portion of our population. As Evergreen® leaders, I think we are better poised than anyone to agree that good people are the key to a successful business, so why wouldn't we want the deepest pool possible of good people?
There was a time when it was “business first,” but it’s become obvious that it must be People First; you need great people in your business to build great processes, and therefore drive Profit. And Profit, while always a partner to Purpose and the other 7Ps principles for Evergreen leaders, is a wonderful thing! It allows our companies to grow and thrive, it allows us to support our employees, and it allows us to do good in the world in the best way we can. So how do we move toward a place where we preserve, or even increase profit, all while stepping outside of the broken playbook? I propose three first steps.
Open Your Eyes
First, look around and acknowledge that we live in a society characterized by extreme inequality. It’s easy enough to talk about merit, about the value of hard work, and about the very few, visible, and wonderful examples of people who have managed to transcend the life they were born into. But it’s not as simple as equal effort = equal opportunity. And it starts early. A child born into poverty, as I was, or even just born poor will be exposed to 2,000 words by the time they are two years old. This becomes their base as they develop their linguistic functions, their brains, and their ability to learn. A middle-class child, in contrast, will be exposed to 30,000 words in the same time frame. Imagine the advantage these children have already, at age two. They are still years away from school.
In order to begin to make change, we must first accept that change is necessary. Open your eyes.
Open Your Doors
When the two children described above–let’s call them ReVonté and Blake–grow up and one day send you their resumes for an open position in your company, the old playbook and the habits formed around it kick in. Both candidates have undergraduate degrees, but they are far from being on equal footing.
ReVonté managed to complete four years of college, spending the first two in a community college and the last in a four-year state school. All throughout, he had to work to pay his way, which meant it took him more than four years to get his degree. Further, in the summers, he had to make as much money as possible, which put him out of the running for an unpaid internship in your industry. And finally, his name is ReVonté, which clearly identifies the world he comes from.
Blake went straight from high school to a four-year college and finished in four years. He did not work during the school year and was therefore able to focus exclusively on school and earn top marks. During the summer, his dad’s friend helped him get an internship at a great company, and though it was unpaid, he was able to live at home. He has, as a result, real work experience.
It’s easy to see which candidate is most likely to get an interview, and for reasons that, under the old playbook, seem reasonable and fair. But let me ask you to consider this: Which young man had to demonstrate more perseverance, more grit, and more resourcefulness to get where he is? You won’t know for sure until you invite them both in for an interview. Open your doors.
Open a Backpack
The old playbook, as we saw in the example above, rests upon the logic that education is the key to preparing people for jobs. Yet the inequality that began when ReVonté and Blake were two years old just got worse as they moved into school. It’s reasonable to expect that students make an effort, work hard in school, and strive to learn. But what if they don’t have the most basic supplies to complete their assignments? What if they don’t have a computer? Or what if the school gives them one, but they don’t have internet at home? The list of reasons that school is not the great equalizer we assume it to be is extremely long. If we want to continue to point to education as the key, we must make sure good education is possible. For everyone.
At Scribe Media, we saw this problem and decided to literally Open a Backpack. We found the school in our area with the highest number of kids getting free lunch and we decided to provide a backpack filled with ALL the supplies on the school’s list for all 500 kids in the school. We all came together and filled the backpacks ourselves in what became an outstanding company-wide event. It cost us $18,000. And it was a write off.
If you are going to continue to preach and believe that education is the key, then help make education equal. Open a backpack.
As you begin the work of opening your eyes, your doors, and a backpack, there are concrete steps you can take to move away from the old playbook. For example, as you prepare to write a job description for a new opening you are about to post, ask yourself, is a college degree really necessary for this job? What are the skills, rather than the degrees, that will make a person successful in this role?
As you prepare to head into an interview, instead of creating a list of questions focused on education and work experiences, step back and think about the characteristics you hope your new hire will have. Are you looking for curiosity? Are you looking for someone who is a self-starter? You might have more success discerning whether a candidate possesses these characteristics if you broaden your scope and ask about life experiences in general. The keys to perceiving the true strength of a candidate’s character might not be far under the surface, but your questions need to leave room for them to rise to the top.
The modern leader will be the leader who looks to others to help understand the big picture, and who designs a playbook that makes space for both ReVonté and Blake. The modern leader will not simply tolerate or accept, because both of these terms still imply insiders and outsiders. The modern leader will push past his or her comfort zone, invite ReVonté and Blake in for an interview, get to know them both, hear both of their stories, and then decide who has the skills necessary to do the job.
Carving Out a Space to Give Back to Science
A typical Contract Research Organization, or CRO, will contract with companies in the pharma or biotech industry to help them design, manage, and analyze various aspects of clinical trials that are conducted to study the safety and efficacy of new drugs. Most small to medium-size CROs will typically grow until a point when owners or investors will look at selling to either private equity firms or a larger CRO. It’s a lucrative path, but it’s not the path of my Evergreen® company, Innovaderm.
I began my career as an academic researcher. Twenty-two years ago, I started Innovaderm, and five years later I left academia to devote my entire time to my company. We are a CRO that specializes in dermatology, and though our headquarters is located in Canada, we also have employees in the U.S., Spain, India, and Poland. Like most CRO’s, we contract with pharma and biotech companies on studies, in our case involving treatment for diseases of the skin. A client may come to us with a drug they think may improve a certain disease like psoriasis. We might help them design the study, write the research protocol, obtain the proper approvals, manage the project, coordinate and monitor the sites conducting the study around the world, and have our biostatisticians and data managers analyze the data.
There are 3 phases of clinical research: phases 1, 2 and 3. Phase 1 is usually the first study in human beings and focuses on drug safety and tolerance. Phase 2 is the first study in a patient population having the disease for which the drug is developed. Phase 3 is a larger study, or often two identical larger studies, that are needed before a drug can be marketed, to characterize the safety and efficacy of the drug.
Most of our time is spent managing phase 2 and 3 studies, which is typical CRO work. However, between 5-10% of research projects that we manage are where we are unique and different from our industry peers. This is where our Evergreen philosophy sets us apart.
Often, we have ideas for studies that may not interest our clients, but whose results would be important for advancing science and treating people more effectively. In what we call Internal Studies, we fund and conduct these studies on our own. Here’s an example.
A significant number of people suffer from eczema on their hands. It can be very painful and can prevent people from working or functioning normally. Studies to better understand the cause of hand eczema have been limited because patients often refuse to have a biopsy from their hand, which is a very painful procedure. We recently initiated an internal study on hand eczema to better understand this condition, using non-invasive imaging techniques and techniques to study gene expression and bacteria on the skin. If we can advance understanding and treatment of this condition, we would be able to help a great many people. This study is entirely internal; we have no sponsors, no partners, and no one company will profit from our work, including ours. We simply hope to advance science’s understanding of this disease. It’s a People First initiative in the broadest sense of the term.
A few years ago, I wanted to find new ways to be able to fund and protect the future of non-industry-sponsored drug studies so we created the Montreal Dermatology Research Institute (MDRI), a non-profit through which some of this work can be done. Innovaderm makes donations to MDRI which can fund studies related to skin diseases that are conducted in an academic environment. An exciting MDRI initiative that was announced in 2021 is a multi-year grant for research in skin-related, neglected tropical diseases. A disease is typically categorized as ‘neglected’ when it exists in a country or region where it is difficult to adequately fund research, in other words, lower-income countries and regions.
Every week, I receive emails from people that want to buy our company. I say, “No. That’s not what I want to do.” Because I know what will happen. If we sell the company, the 90-95% business that we do that is making money will become the focus of the company. The 5-10% that is for the advancement of science will not be interesting to them because it is more of an expense. It will disappear. In addition, the buying company would not donate money to a non-profit such as MDRI, would restructure Innovaderm, and a large number of people would lose their jobs.
I don’t want Innovaderm to be like the other CROs. My philosophy is aligned with the Evergreen 7Ps® principles. With the non-funded internal studies we conduct and the donations we make to the MDRI, we are deeply committed to giving back to science. Because of this, we are unique in our industry. Most CROs are driven to make as much profit as fast as possible and do not embark on projects that don’t generate profit. That’s what makes us different. And that’s the reason I am a member of Tugboat Institute®.
The Key to Building a Global Business
Before becoming the seventh generation President & CEO of Hollingsworth & Vose, an almost 300-year-old global leader in filtration and energy storage solutions, I spent seven years living and working in China. The experience changed the way I think about business and the world and taught me one fundamental lesson that drives my work today. It’s not your revenue, your number of employees, or even the addresses of your offices that make you a global company. If you want to truly be global, you have to be global in your thinking, in your mindset, and in your infrastructure.
My journey to this realization started in 2007 when I was working for General Electric and signed on for two years abroad. The initial plan was to go to Belgium, but about six weeks before we were slated to depart, my wife and I found out that plans had changed and we were off to Shanghai, China instead. We had both been eager to spend time abroad, so we adjusted to the new plan and set off with our children, who were four and five at the time.
The original assignment was for two years. We wanted to make the most of the experience, so we made a few choices right off the bat that were not typical for expats. We enrolled our kids in a local international school, rather than the American school, and despite the fact that most of our Irish, English, and Australian friends lived in heavily expat neighborhoods, we chose to move to a very local neighborhood instead. We did do most of the other, usual expat things: language lessons, classes on how to assimilate, and classes on the culture of China. In the early months, I would have told you I really understood China and was becoming an expert. But as we neared the end of our two years, I found that the more I learned, the less I understood. I was not ready to leave.
Around that time, I had the good fortune to meet Val Hollingsworth, President and CEO of Hollingsworth & Vose, which today serves the global market with 13 R&D facilities strategically located in the Americas, Europe and Asia. At the time, Val was looking for a new managing director for H&V’s expanding operations in Asia. Drawn by H&V’s reputation for innovation and its commitment to creating a cleaner, healthier, more sustainable world, I left GE in 2009 and joined H&V. Over the five years I spent in the role of Vice President and Managing Director for H&V’s Asia operations, my learning and understanding of what it means to be a truly global company shifted dramatically.
My years at GE were a great start to my career in China; GE was extremely well-established in China, and I learned a lot from being part of their large team. When I got to H&V, which had a smaller presence in China at the time, I started to really learn the complexity that is China.
For one thing, GE was firmly a western company operating in a foreign country. I learned a lot about managing a business, but I was managing a western business with a western mindset. The members that were not from the west were expected to adopt the culture and practices in place. At H&V, we were, as we always have been, heavily innovative and interested in creating something new. Initially, our strategy was to serve our western customers in a western market, but we were struggling. As we looked for ways to innovate and improve, we started listening to the local markets as well. We saw great opportunity there and started moving to become more global – or to become global in a different way. Doing so would make us a valuable partner and a true worldwide leader.
In terms of the specific skills and lessons that I learned as I moved through this experience, the biggest ones are related to communication. Of course, learning the language of a country affords an important window into understanding a culture. But it’s not all about language. Probably because I didn’t have a perfect understanding of the language, I found that I started to develop other ways to try to understand what people were saying to me. I paid close attention to tone, to body language, and to other non-verbal cues.
In China in particular, people will always be unfailingly polite and will tell you things in a way that sounds pleasant and positive. But there is usually a subtext. In the west, for example, once you have a contract, you have a deal. But in China, it’s all about relationships. A contract is just the start. I learned to pay attention to people’s behavior and take the time to develop that relationship, to ensure a good outcome for our endeavors.
Within the company, I started to see that we had been hiring the wrong people, too. It is typical for a foreign office of a U.S. company to look for the people who speak the best English and to assume that they will fit in the best and therefore be the most valuable. But I learned that intellectual curiosity and a willingness to dig in are by far the most important characteristics in a new employee. And if they come from a different cultural and linguistic background, that is actually a bonus, not a hindrance. I understood that if we wanted to succeed in Asia, we needed people who could understand the local markets and think in an eastern way.
Now that I am back in the States, I see that that the value of a diverse team with a diverse mindset is important no matter where you are if you intend to be successful on a global scale. Yes, it takes a willingness to make an effort and a willingness to get past the discomfort of not understanding everyone’s perspective right off the bat. You have to pay attention to things such as not over-using colloquialisms in meetings and being sensitive to the fact that a meeting you schedule for late morning will fall late at night for teammates in Asia. But the rewards of working with a diverse team outweigh the challenges many times over.
This goes for gender equity on your team too, by the way. They are great at this in China; having had a diverse and gender-mixed team, I never want to go back. If you are not actively recruiting female candidates, you are missing out on 50% of the great people out there.
Since I’ve returned home, I have also realized how diverse this country is. I hadn’t seen it before, but we can be very regional and factional, which also adds strength and diversity to a team.
At H&V, we have been moving toward a more open and diverse mindset and building a workplace where all are welcomed and heard for some time. It’s a process. I am excited to bring my international perspective to the table to strengthen the work that was already underway and to help us become even better. Study after study has shown that diversity strengthens a team, but now that I have lived it, I don’t need to read the studies. It’s happening right in front of me.
Purpose Plus Learning Can Make the Impossible Possible
“People who say it cannot be done should not interrupt those who are doing it.”
- George Bernard Shaw
I am Chairman & President of Shasa, a fashion brand with more than 100 stores in the best shopping malls in 31 of the 32 states in Mexico. My brother Carlo is CEO and together, we founded the company in 1990. We started from scratch. Today, we are a strong and proud Evergreen® company, but I can’t say that the purpose that drives Shasa in 2022 is the same one that has driven us from the beginning. It has been a journey characterized by challenging odds, daunting obstacles, and, above all else, constant learning.
My early childhood was spent in a town on the Gulf of Mexico, and I remember life there as very happy. When I was still young, however, my mother got sick and needed a transplant, so the family moved to Mexico City. Suddenly, life was hard and unhappy, and even more so when my mother passed away. I was nine and Carlo was six. A couple of years later, our father re-married and this brought even more challenges. Everything had changed drastically within a few short years, inspiring Carlo and me to set our first life goal: somehow earn enough money to run away and become independent. Thus began our journey.
The most obvious way to make money seemed to be by selling something, so we started selling. In the beginning, we bought handmade fashion jewelry and sold it. I was about 11. After a few years, our dad, who is a chemical engineer, taught us how to make a Pine-Sol-type cleaner, so we made that and sold it. We sold it to friends, neighbors, anyone who would buy it. Although we didn’t get rich and we made a lot of mistakes, we learned a lot about how to collect money, about the struggles maintaining consistent quality in our product, and about balancing the cost of materials with price. At that time, I was 14.
Although things were tough at home, my brother and I did have the opportunity to go to college. Nevertheless, we remained fixated on building a business. When I was a sophomore in college and Carlo was still in high school, we started selling clothes. Miami Vice was wildly popular at the time, so we had the idea to manufacture clothes inspired by the ones they wore in the show. Remember the short, square pants and the neon t-shirts? We started making those and it turned out that we had hit on a good item. We bought the fabric, found a manufacturer, and created our own brand.
Our vision really locked into place with this venture. Carlo and I had discovered our Passion for Fashion; it’s driven us and been part of the organizational culture of our company ever since.
We sold the clothes to students at the high school and the college, and we were very successful. Soon we started selling wholesale to retail stores. As a result of this success, we finally made enough money to leave home, so we did. It had taken a long time, but we had earned our independence.
Moving through this process, we learned the hard way, by doing and failing–sometimes dramatically–but we never quit; we kept learning and trying again, figuring out over time how to minimize risk and maximize the upside.
In those days, because we were bringing our product to our customers, we needed a place to display our clothes. We had a yellow Volkswagen Beetle, so we filled the trunk with the clothes, drove around to the schools, and sold out of the car in the parking lot. That was, I suppose you could say, our first store.
That Beetle took us to many fun places, always combining business and pleasure. We loved going to Acapulco for the weekends, parking the car, and selling our clothes. Only after we had sold all of our merchandise and hit our goal did we head to town to have fun; it was our reward. Then, Sunday night, we drove back with all the cash we’d made.
Soon, we started traveling farther, to Canada and the US, always with the same plan: travel, do business, make money, and learn along the way. As we traveled, we would bring materials from wherever we had been and sell them. We learned about tariffs and the ins and outs of importing and exporting products. By the time I was 22, in 1990, we created our first corporation and, one year later, we opened our first real wholesale store. We started sourcing internationally – from India, Spain, the US.
Crisis equals opportunity. In the mid-nineties there was a huge economic crisis in Mexico, and everything collapsed. Although it was a hard time for our country, the market had cracked open, and we saw an opportunity for the business. Within less than two months, we turned all our storage facilities into manufacturing facilities, and we were finally poised to start building the company we dreamed of, turning Shasa into a private brand, exclusive to our stores, and controlling the whole supply chain.
On the day we opened our first Shasa retail store inside a mall, in the midst of the crisis, we announced to the friends and family we had invited that we were going to open 100 stores. Our dad was dubious; maybe one store each, he predicted. That was in 1995. Today we have 108 stores and over 500,000 sqare feet of retail space.
As we grew the business and grew up ourselves, we experienced our fair share of growing pains. To move past them, we did not rely on confidence and determination alone; we also sought more formal opportunities to learn. In 2000, for example, our company was growing fast, and we decided we needed to educate ourselves more about running a business, so we enrolled in IPADE Business School, in Mexico. We completed their management program, one year apart from each other.
In 2012 we again felt we had more to learn, so we applied and went to Harvard Business School, me starting in 2012 and Carlo in 2013. We have come to firmly believe that we can’t stop learning – there is no end to learning in this story.
Since the beginning we dreamed big; we visualized ourselves as very successful entrepreneurs. Despite the many obstacles we faced, we always believed we would make it happen.
Over time, our purpose settled into what it is today: to inspire and empower people to unleash their potential and accomplish stretch goals. We ourselves have managed to accomplish something no one thought we could. We hope to inspire others with our contagious passion because we have learned that, when united around a shared purpose, the potential for impact grows exponentially.
Switching From Defense to Offense
As leaders of companies, we have all experienced downturns. The economy, the markets, the political climate, the weather, or an invisible virus can all crop up and cause things to shift in unexpected directions. An instinctual response to adversity is to pull up the drawbridge and prepare to hunker down and wait out the crisis, minimizing expenditure and risk. But as I look back on my last few years as President & CEO of R.A. Heath Construction and Millwork, Inc, I have learned something about myself; when the going gets tough, for better or worse, I switch from defense to offense.
Taking a risk and trying something new as the knee-jerk response to a slowdown is not what I advise. Recklessness is never recommended. However, I have learned that when certain conditions are met, it can be right to favor the bold move.
It might be fair to preface this story with the admission that a strong willingness to be bold and try new things has been part of our culture at R.A. Heath for years. I have gained confidence from some early moves that were a little risky but that turned out great. One example is from a several years ago, when remodeling was still the core of our business. We were strong in general and had even pioneered a method for remodeling a café or restaurant that allowed us to guarantee it would take no longer than two weeks. Starbucks, among others, has adopted this method for all its remodels, incidentally. But I thought we might be able to find ways to serve our customers even better.
Closing a restaurant or café for a remodel necessarily means lost business, which is a hardship for our clients. I started wondering if there might be a way to mitigate that. We were building temporary cafés for our clients so they could recoup sales while they were closed. This was time consuming and a big expense for each project. I joked with our client that I could just build out one of our construction trailers to sell coffee. That seemed like a great idea, so I took it one step further; we bought and built out a fleet of trailers to rent to our clients to use during their remodels. It was a big cost to us up front, but then we had a plan to help our clients retain some revenue, and to make money ourselves at the same time. This is an example of the mindset I strive to model and inspire at R.A. Heath, and certainly laid the groundwork for how we fared through a really big crisis.
As an Evergreen® leader, the first thing I need to know is that I can take care of my team. This priority drove some of the decisions we made in the weeks and months after Covid hit. Our industry, as everyone knows, all but ground to a halt in 2020. Many of my competitors started laying people off immediately to cut costs as revenue disappeared. Driven by the desire not just to hang onto my employees, but to create opportunities for them to thrive, I started looking for new ways to deploy our manpower.
My sister is in the restaurant business and early on, she started struggling to meet the new standards that might allow her to remain open. Dividers for her booths and tables suddenly became a high-priority item, but she found they were in short supply. I reflected; we had millworkers, construction workers, and construction equipment. I thought–we could make those! It soon became clear that the demand for these dividers would continue to grow, so we considered how we could make this product even more profitable. At first, we were buying a piece of molding from the guy down the road, but I thought–we could make that, too! We bought more equipment, invested in training and were soon producing every aspect of the dividers. We brought all the profit margin back in house, our team was busy and productive, and we had a new product line and revenue stream.
Another opportunity I saw as we moved into the slowdown was time. We had been so busy, and things had been moving so fast that we rarely had the luxury of being introspective. But when things slowed to a crawl during Covid, instead of sitting around wringing our hands, we decided to take the opportunity to study our processes and expose some of our weaknesses.
One thing we realized was that our entire cabinet-making division, which had been automated at great expense several years earlier, was not optimal. It depended on all parts of the process working perfectly, and a small glitch in one area could stop production completely. I was also conscious of the fact that running this automated process was not ideal for my employees; I am dedicated to helping them learn a trade, but we were instead just teaching them to push a button.
With the help of my accounting and finance teams, we looked at the numbers and decided to make a bold move; we shut down the automated process, got rid of the hundreds of thousands of dollars’ worth of machinery, and reverted to making our cabinets by hand. If we weren’t an Evergreen company, we never could have done this because it took time to build back to profitability. But now we are teaching a trade again, we are less vulnerable to work stoppages, and frankly, the quality of our cabinets has vastly improved. It was a good decision.
When the crisis started to abate and regular business returned, many of my competitors were not ready to meet the demand. But we had kept all our employees, diversified our products and services, and planned for the price increases and the surge that hit us. We were in a strong position to roar back to life–even stronger than we had been before the crisis.
As a result of our successes with offensive rather than defensive moves, in both the good times and the bad, I am proud to say that at R.A. Heath, I have led the establishment of a culture of open-mindedness; I am constantly coming at my team with new ideas, and they are ready to run with them. We don’t need a crisis to innovate and try new things. We’ve gained confidence from past successes, and we have a strong process for vetting new ideas, to help weed out the ones that are impractical and troubleshoot the ones that have promise. It has created a mindset of creativity and problem-solving throughout the organization, and has been the key to our success, even through challenging times. At R.A. Heath, we are not content to survive; we aim to thrive.
Tugboat Institute Summit 2022: Magic in the Mountains
Something extraordinary happened in Sun Valley last week. After two Tugboat Institute® Summits adapted to COVID, we were back in person in record numbers. The magic that happened throughout the week was clear evidence of the power and importance of our wonderful Evergreen® community.
Wednesday and Thursday mornings were spent hearing from 18 outstanding speakers on topics ranging from the exploration of different mechanisms to scale, to the sharing of personal challenges and journeys, to consideration of philosophies of leadership, to the importance of love.
The talks left us thinking in new ways, feeling deeply, and profoundly enlightened. Jeet Kumar of In Time Tec opened the talks on Wednesday by sharing his thoughts on love and leadership. His story opened our hearts and brought the audience, both in the theater and online, into a space of intimacy and support that was sustained throughout the rest of the experience. Lisa Ingram of White Castle shared what innovation looks like over time in a 100 year-old company. John Garrett of Community Impact Newspaper whetted our appetites for more conversation about the possibilities presented by partnerships with economic development groups in a short, 5-minute talk and then Dennis Jaffe, Senior Research Fellow at BanyanGlobal Family Business Advisors, shared his considerable wisdom about how to think about future generations as we consider the path forward for our businesses. We had an astounding and unique experience led by the entrepreneur, musician, and magical human being Murray Hidary. Murray shared his thinking on creativity and then invited us to connect with our creative centers as he performed an original, improvised piano concert. The experience was moving in unexpected and deeply profound ways. Following Murray’s performance, John McCullough of James Avery shared how and why James Avery became a vertically integrated company, and the competitive advantage it has given them. Mel Gravely of Triversity took the stage next for a 5-minute update on his thinking about conversations about race in America since he last presented on the topic at Summit 2021. Mel was followed by Courtney McKee of Headframe Spirits who shared her inspiring story of extraordinary perseverance and triumph in the face of challenges. Finally, Dave Thrasher of Supportworks shared his family’s journey scaling their company in a variety of ways, and the lessons learned through each experience.
The talks on Thursday were equally outstanding. We began the morning with a pre-recorded conversation between Dave Whorton and one of his heroes, the legendary Tom Peters, who spoke about his book In Search of Excellence and his current perspective on the topics he discussed in the book. Jane Blain Gilbertson of Blain’s Farm and Fleet told the story of fighting a private equity entrant into her markets; in her talk, she shared her disturbing and inspiring story of pulling her entire team together to beat a private equity-driven attempt to undo the Evergreen company her family had built over three generations. Bobby Jenkins of ABC Home & Commercial Services gave a 5-minute talk that offered insight into the opportunities available to businesses when they partner with their Chambers of Commerce, and then Samson Liu of SOH Dental shared his story of starting his own Evergreen company after the disillusionment of working in a company bought by private equity. We were then honored to invite Kevin Cahill, Executive Director of the W. Edwards Deming Institute, to the stage. Kevin shared his grandfather’s Deming philosophy with us, in particular the importance of looking at the shortcomings of the system, not team members, in People First companies. After Kevin, Brad Cleveland took the stage for a short, 5-minute talk on Leading the Customer Experience, which just happened to be inspired by a conversation he had with W. Edwards Deming very early in Brad’s career. Finally, Tugboat friend Anese Cavanaugh, Founder and CEO of Active Choices, brought us back to ourselves and invited us to consider self-care and self-partnership as essential leadership skills. Following Jeet’s powerful opening talk, Anese’s talk served as a wonderful bookend to the two days, during which we were exposed to ideas, practices, and stories that will help bolster our businesses, our families, and ourselves.
The afternoons were spent in dialogues with speakers over lunch, and then in a variety of activities that allowed attendees to share time in the beauty and magic of Sun Valley. We celebrated the friendships we cherish and got to enjoy, the new connections that we look forward to nurturing and growing over time, and the support and love of our incredible community.
Tugboat Institute Summit was magical, as it always seems to be when Evergreen leaders gather. Fortunately, we have more opportunities to gather again on the horizon!