podcast | March 9, 2015
Case Study: The Board of Directors’ View on Sales and Marketing Effectiveness
Fred Florjancic, the Chairman of the Board at Ramsey Industries, and a member of the board of directors at the Elkay Manufacturing Company and at Liberty Tire Recycling, recently appeared on the SBI podcast.
The topic of our discussion was sales and marketing effectiveness from the board’s perspective, as it relates to accelerating revenue growth.
You can listen to the podcast here.
Fred is worth listening to for prior to his board work he was the CEO of Safety Kleen and Brunswick Corporation, and had a distinguished 40 year career.
If you are a board member, or a CEO of a company looking to grow, you should listen to this podcast. By doing so, you will learn:
It is not often that a board member makes themselves available for this kind of interview. Please take advantage of this opportunity and listen to Fred’s wisdom.
Speaker: Welcome to the SBI podcast, offering CEOs, sales and marketing leaders ideas to make the number.
Greg Alexander: Welcome, everybody, to SBI’s weekly podcast series. I am Greg Alexander, the CEO and founder of SBI and the host of the show. Today we have a very special guest on the show, a unique opportunity to hear a different perspective from the chairman of the board. We have with us Fred Florjancic. Fred, amongst many things, is the chairman of the board of Ramsey Industries, and he also sits on the board of LK Manufacturing Company as well as Liberty Tire Recycling. Prior to his board work, Fred was the CEO of two billion dollar plus organizations: Safety-Kleen and Brunswick Corporation. Before Fred began his forty year career, he received an undergraduate degree and an MBA from Indiana’s University’s Kelley School of Business.
Today we want to hear from a board member’s perspective on sales and marketing effectiveness. Specifically, we want to discuss accelerating growth early in a fiscal year. This is the first time that we’ve had a chairman and a board member on the show, and I think this is a very interesting perspective because Fred over forty years started like we all did in his early career, rose up to be a CEO, which is quite an accomplishment in and of itself and has a perspective of that, and now he has a perspective of working for the shareholders and making sure that the CEO is deploying capital correctly and generating return.
That’s going to be our topic today. Fred, welcome to the show.
Fred Florjancic: Thanks, Greg. It’s great to be here.
Greg Alexander: Great. All right, so first question: how should a board member evaluate if the sales and marketing strategy is being executed?
Fred Florjancic: Well, when you take a look at any company from a board perspective, you have to start with what the company really looks like, so you take a look at its infrastructure, and I classify that very simply, you look at the people, its products, its plants, its processes, its prices, kind of like the five P’s, some basic understanding of the infrastructure, the people, the culture, and the competitive position that the company is in. When you do that, you’ve got a pretty idea is the company a market leader? Are they a follower or they an also-ran that’s a turnaround in process? Depending upon where you are in that spectrum, the board will take a different view as to future performance.
Greg Alexander: I’m assuming the cadence is the quarterly board meeting. Tell us a little bit about the content of those meetings specific to sales and marketing or revenue performance, and is there any …
Fred Florjancic: The larger the company, Greg, the more your face to face meetings tend to be quarterly, but in private equity owned corporate America, you normally have quarterly or five face to face meetings a year, but you usually have a monthly board call that can last an hour, two hours. In obviously even larger companies, publicly owned companies, if there’s something going on of a significant nature at the company, then you’ll have more frequent interaction. From a sales marketing perspective, obviously sales revenue and revenue growth is paramount. You can only cost reduce your way to profitability for so long, but revenue growth is key. From a board perspective I think it’s important that sales and marketing, if the departments are separate, are working in concert with one another. That becomes fairly obvious, depending upon sales performance.
Greg Alexander: Many of our listeners fret about preparing for the upcoming board meeting, whether it’s a monthly meeting or the quarterly meeting, they get really nervous about it, and it actually reduces their productivity because they spend too much time preparing for it. If you were to advise somebody that was going to present a business review to you in the context of a board meeting, what you’re looking for and help them streamline how they prepared for those meetings, is there a generic set of advice there or is it too company-specific to even comment on that?
Fred Florjancic: Well, I think there’s some generalizations that would be applicable to both small and large companies alike, and it really doesn’t make any difference what industry you’re in. There’s revenue generation and revenue stats, and whether you’re selling a product or a service, and you want to take a look at the past and current performance in terms of growth or lack thereof, the kind of backlog, the bookings versus the actual revenue being accounted for, making sure that whatever KPIs a company zeroes in on in the sales marketing context, are highlighted at the board level. From a board perspective, I’ve always told the CEO and management teams that I’ve had the pleasure of either working with the CEO or as a board member, to present in some re-executive fashion, the same kinds of materials and KPIs and information that you use to run the business so that you’re not spending laborious amounts of time preparing for board meetings; it’s basically a continuum. You’re giving them an executive summary of what you do every day.
Greg Alexander: Interesting. You would think if everybody was on the same page all the way through the board, and they agreed upon set of KPIs, then the work to prepare for board meeting shouldn’t be that laborious. That makes a lot of sense.
Fred Florjancic: Exactly, exactly.
Greg Alexander: Let me ask you to reflect back on your time as a CEO. Nothing goes according to plan, and every now and again there’s a miss on the EBIT line or a miss on the top line. How does a CEO recover from such a miss?
Fred Florjancic: Well, first of all I think as CEO, you pull your management team together and you gather the facts, you assess the situation and find out what went right, what went wrong, where were you off base. Were there macroeconomic impacts that you had no control over? Was it competitive responses? Was your pricing strategy incorrect? Was the team that you have, whether it be sales, marketing, finance, IT, human resources, were they all working in concert or was there some internal struggles that kept you from making your numbers?
Once you asses that situation and the team, I think if they’re honest with one another and got a good working relationship, you come to some fairly strong conclusions as to what needs to be fixed, and you go about putting together a plan to change the situation.
Greg Alexander: What I found sometimes with misses is the time period to address the fix can be unrealistic at times. What I mean about that is, especially in the B to B context where you could have a six to twelve month sales cycle, so if I missed the number in Q1 as an example, it reflects what I did and did not do six to twelve months ago, so therefore, the decisions or the recovery plan that I put in place right now, might take six to twelve months to make an impact. Sometimes my experience has been, especially with private equity boards, is they don’t necessarily have patience for a promised fix that might not materialize for six to twelve months.
How do you develop what I would call organizational patience?
Fred Florjancic: Very difficult, and I know exactly from where you’re coming from, because I sit on a couple of private equity owned and operated companies and their boards, so I understand the patience element. It’s very difficult for a CEO and their management team to recover, because you’re exactly right, depending upon the situation it could take six to twelve months depending upon the sales cycle to recover. But at the same time, people are pragmatic and they understand things can’t change overnight, even private equity boards, but if the management team is doubling down and trying to fix and putting together strategies and practices to fix the situation and to improve upon their sales marketing performance, that’s important.
Part of it is understanding your pricing product launches and making sure that they go off correctly, looking at your business from the outside in as opposed to inside out. By that I mean understanding your industry’s buying practices and your competitive position, your strengths and weaknesses, and your strategy.
Greg Alexander: Interesting. All right, we’re going to take a quick break here. When we come back from the break, I’m going to ask Fred to comment about the CEO’s role in leading the sales and marketing team, so we’ll be back in a brief moment.
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Greg Alexander: Welcome back, everybody. I’m here with Fred Florjancic, chairman of the board of Ramsey Industries, and today we’re talking about sales and marketing effectiveness from the board’s perspective. Fred and I have had a long standing relationship and have worked together in multiple scenarios. When he was a CEO, one thing that always impressed me was he was the leader of the sales and marketing team. He had functional leaders in those departments, but he was an active member of that team and led from the front and spoke to customers and was involved in setting the sales and marketing strategy. Unfortunately, a lot of CEOs don’t believe that’s part of their job and when they miss the revenue number or they miss the EBIT target, they just want to point fingers at the poor sales marketing guy or gal, even though they’re working really hard to try to do what they can.
Fred, now that you’re out of the CEO seat and you have the different perspective of a board member, what advice would you give CEOs in the role they should play in leading sales and marketing teams?
Fred Florjancic: I think, Greg, you outlined my philosophy very well and articulated it extremely well. The CEO, I don’t care what kind of company you run – large, small, or what industry you’re in, the CEO has got to be the number one sales marketing leader in the organization and has got to be out front with the customer, the customers are key, and has to understand the marketplace, how his company or her company competes, the competitive division that they’re in, and you don’t get that by sitting in a corner office isolated from your sales and marketing organization. You have to know what’s the latest and greatest in terms of promotional techniques. Today, social marketing is very important. You got to understand your products as how the customers view those products and services, so you got to be up front, and there’s no excuses not to do that.
Greg Alexander: When we’re working directly with the sales leader and we encourage him to get his CEO involved in the sales strategy, sometimes they’re afraid to do that. They feel that that’s their job and sometimes they can be control freaks, to be honest with you. What advice would you give a sales leader who might be a little insecure in letting his CEO into his world of sales?
Fred Florjancic: I would say first and foremost, you’re taking yourself way too seriously. Use all the tools and accouterments you have at your fingertips, and having a CEO along with you in a sales call, opens up doors at some of your customers that perhaps you as a sales executive, sales VP, sale executive VP, can’t open. When I would make calls to customers, I was able to open doors to the CEO suite or a large divisional, if it’s a large multi-national, that the sales executive couldn’t get to. Use the CEO in an advantageous way to help you in the sales organization. It’s not a weakness. Quite frankly, it would be viewed in my book, strong CEOs would view that as a strength.
Greg Alexander: I agree, so I appreciate your encouragement there. You’re all on the same team, right?
Fred Florjancic: Absolutely.
Greg Alexander: Yeah, so what are you hiding if you’re afraid to do that? I just digressed a little bit into all those years you spent as a CEO, and I want to come back to your knowledge as a board member. Knowing what you now know, from the board’s seat, and looking back on your tenure as a CEO, would you have done anything differently?
Fred Florjancic: A few things. I think I had the luxury of being a CEO later in my career, you mentioned forty plus years. It was really the last ten years that I had CEO type positions, so I had thirty years of experience and perspective in a variety of different industries, in a variety of different roles, which helped the CEO role that I took on in the latter decade of my career.
From a board perspective today, the only advantage that I would have is that I’ve continued to have the benefit of looking at different industries, different companies, different sizes, different sophistication levels of management teams. The one point that I would encourage a CEO to take a look at, if an individual on his or her team is not performing, after some constructive criticism, if things don’t improve, then another opportunity probably has to be presented to that individual. I would do that quicker than later. Many CEOs, I think, wait far too long and situations don’t improve, and it just comes back to haunt them as a result. I think it becomes pretty obviously sitting a board meetings, whether it be quarterly or even with monthly phone calls, whether an individual team member is not performing.
Greg Alexander: Let’s talk about that for a moment. Talent, the ultimate job of a board member is to hire the right CEO and make sure that CEO is going a great job, and then of course, the CEO has to set the strategy and build a team that can execute that strategy. Throughout your career, four decades, if you would have put a weighted percentage on things outside of talent, such as maybe markets or products or performance conditions and the quality of the management team in terms of its contribution to success, how much would you put on talent and how much would you put on other elements?
Fred Florjancic: I’d say talent by far is the key. Even in difficult markets, in difficult economies, in difficult industries, and turnarounds are obviously a good example, there’s no substitute for talent. You want to surround yourself with the best talent that money can buy and I always, even before my CEO days, when I was a manager of a particular thing or a chief financial officer, you wanted the best people working for you, because you don’t have all the answers as an individual, you can’t possibly in today’s very complex world, have all the answers, so surround yourself with the best talent and celebrate their promotions onwards and upward. Hiring, onboarding, coaching, counseling, training, that’s one of the manager’s key functions.
Greg Alexander: It is. It’s such an obvious thing, but management teams get busy, and next thing you know you can look at the calendar and six months has passed by and you haven’t spent quite enough time on developing and recruiting talent. It’s an easy thing to fall victim to.
Fred Florjancic: No question.
Greg Alexander: On that front, the CEO’s job is to pick his team, specifically in this case given our audience, the sales leader and the marketing leader. On the boards that you sit, does the CEO give the board visibility to his direct reports? Do they participate in the board meetings or is it hands off in that sense?
Fred Florjancic: No, in every circumstance that I can recall, even back in my days when I was a chief financial officer, all the CEOs that I worked with brought their senior members into board meetings. Maybe not during the whole board meeting, the larger the company, but certainly in key elements of it, and certainly would have board dinners so that there would be interaction with board members. In smaller companies, absolutely, you want to see the entire team, and they’ve got to be front and center and you do the evaluation accordingly, so a lot of interaction not just with the CEO, but with the rest of the key senior management team.
Greg Alexander: Okay, we’re going to take another break here. We have a fresh piece of content we want to make the audience aware of, so we’ll be right back with Fred Florjancic.
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Greg Alexander: We’re going to pick up our conversation here with Fred Florjancic from his point of view, which is a board’s perspective on sales and marketing effectiveness. Before the break we were talking about talent and the role that the board plays there. Fred, if I’m interpreting your answer to that question, which was what is the board’s role, really in evaluating the executive team? Is that the responsibility of the CEO or is that a collaborative effort with the board? What I heard from you, in a smaller company it’s you’re more actively involved, in a bigger company, less actively involved.
In your years of experience, because you’ve hired some great sales and marketing leaders over the years, what makes for a great sales and marketing leader?
Fred Florjancic: Someone who’s certainly an outgoing individual who is articulate, someone who is passionate about revenue growth, sales generation, and I think has a perspective that’s broader than just sales marketing. In many organizations, it’s the sales marketing leader that ultimately becomes a CEO, president and CEO, and a lot of it is because they understand the key to financial success in the business world is revenues and revenue growth and satisfying customer needs. To do that, you have to have the personality traits first and foremost, but once you do that, you have to have a strategy, and you’ve got to have a plan. Someone who can take a look at the universe of opportunities out there, structure and sales organization or marketing organization or both, to effectively capture all the opportunities available to a company and run with it and set the parameters, the KPIs, the cadence calls, just making sure that from a marketing perspective you’ve got the appropriate pricing strategy, you’ve got new products that are developed or asking for new products to be developed to satisfy customer needs. All of those things are key in a sales marketing executive.
Greg Alexander: Does industry matter? Would you hire only from industry or would you bring in from outside the industry?
Fred Florjancic: No, I would … Industry knowledge is nice to have, and if you can find someone who has industry knowledge and contacts, obviously that’s a leg up, but I’m a perfect example. Didn’t necessarily come up through the sales marketing ranks, but I’m a perfect example. My wife always says I’m a jack of all trades, master of none. It’s probably true, but I spent time in the financial industry, I spent time in the consumer, recreational industry at Brunswick, I spent time at the specialty engineered industrial areas, SPX, in the environmental and recycling industry with Safety-Kleen, and now the three corporate boards I’m on are entirely three different industries, so perfect example. If you’re a good executive, whether you’re sales, marketing, CEO type general management, if you’re a good executive with solid training and experience, you could make a transition to different industries.
Greg Alexander: Yeah, I agree with you. In working with private equity boards like yourself, CEO, sales and marketing leaders, they get hung up on this industry thing. My opinion on that is, there’s a limited supply of A players, so don’t constrain your pool to choose from. Draft the superstar and let the superstar come into your team and learn your business, because that’s the thing that’s in short supply is this …
Fred Florjancic: Absolutely, absolutely.
Greg Alexander: Yeah, I agree. Let’s shift gears to another topic. This topic is, you went from not growing up in sales, to use your words, to being an exceptional CEO and board member focused on sales and marketing. For the CEOs and board members out there who have not grown up in sales and might be somewhat intimidated by getting involved in that, how did you do that? How did you make the transition to that and develop your own expertise in that area?
Fred Florjancic: You know, as you’re asking the question, I’m actually trying to figure out in my own mind how I did make that transition. It just seemed to be a natural thing to me. Clearly, when you take a look at how a business functions, if you don’t have sales revenue, you don’t have a business. It is so fundamental and so important that you understand how revenues are generated, and once you understand that, then it becomes I think intuitively obvious that you as an executive, to be successful, you have to play a role in that.
I just naturally gravitated to the sales marketing arena, because it really encapsulates almost all of the business functions, perhaps not finance directly or IT directly, but it does bring in the human resource perspective. You’ve got to understand how products are manufactured, why they’re manufactured in a certain way in order to satisfy customer needs, you got to understand how services are delivered, you got to understand the pricing, what’s good, bad and indifferent in terms of pricing, you got to have new products, because you always have to obsolete your existing product offering and extend its life cycles. It made intuitive sense to me, and it incorporates the vast majority of business functions. When I said finance, and you got to understand the pricing element and how that relates to your cost structure, so you got to have a little bit of financial standing as well.
Greg Alexander: Survival, right?
Fred Florjancic: Absolutely.
Greg Alexander: You want to be a successful CEO, revenue through the till, and who does that? The sales and marketing team, so you got to be actively engaged in it.
Fred Florjancic: Absolutely.
Greg Alexander: We’re going to take one more quick break here. Those that are listening to this podcast at this point are going to be really interested in this. We’ll be right back.
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Greg Alexander: Okay, we’re back with Fred Florjancic, and right now we have just a few more minutes in our podcast. I want to talk to you, Fred, specifically about strategic alignment from product to marketing to sales. There’s a little bit of a debate that’s going on right now. Our belief is that strategies at the functional level should be documented. I’m not talking about writing some extensive document, but they should be documented to where if you’re a marketing leader or a sales leader, you can go around to your other functional leaders. Let’s say you sit down with the CFO and you say, “Here’s my strategy, what do you think?”
Then the CFO can say, “Well, your strategy’s out of alignment with my strategy in the following ways, and let’s collaborate to pull those things together.”
That’s just one example. You could do that across IT, HR, etc. What we found is that a common reason why companies miss the number is because they’re out of alignment. Everyone’s working really hard, but we’re not all working in unison. How have you driven alignment across functions?
Fred Florjancic: I hearken back to my CEO days at Safety-Kleen, and you raise a very interesting, day to day dilemma for any particular senior management team and in particular the CEO, because there’s conflicting priorities, depending upon who you talk to, and that’s one of the reasons why I would have absolutely mandatory weekly senior staff meeting.
Greg Alexander: Weekly?
Fred Florjancic: Weekly. Monday mornings, actually it started around ten in the morning and it would go through until about two in the afternoon, to do exactly that, to get on the same page. Because if the marketing guy has his own particular agenda and he doesn’t report to the sales guy, the sales team has it priority, the IT people have their issues, HR has its issues, there’s training requirements, etc, the operational manufacturing guys have competing issues, and everybody wants the limited amount of capital and/or financial resources or even people resources. So a CEO is constantly playing referee or adjudicating where the money gets spent, where the people and priorities get applied.
You got to have everybody on the same page, you can’t have silos in a company, and if sales and marketing aren’t working together, you’re going to have a disaster. If sales and marketing are working together, but they don’t have the financial support from the finance team in terms of understanding pricing, understanding cost, that’s not going to help, and if the manufacturing and operational side of the business can’t deliver new products priced appropriately for the market because of competitive constraints, etc, then again the team is not working in concert with one another. That was the full time job of a CEO in addition to being the sales marketing leader out there in the marketplace, was adjudicating priorities between the senior team.
Greg Alexander: You probably don’t remember this, but several years ago you and I were having dinner and I asked you for your definition of strategy, and you gave me a quote and it stuck with and I’ll repeat it to the audience because it’s worth repeating. That is strategy is pretty simple. It’s the allocation of three things: people, money, and time.
Fred Florjancic: That’s it.
Greg Alexander: That’s it, and everybody has a limited number of people, money and time, and how you allocate it is the strategic trade off. That’s what strategy’s all about.
Fred Florjancic: Absolutely, absolutely
Greg Alexander: We’re at our time allotment here. Fred, this was fantastic. I really appreciate you being generous with your time. The audience is going to enjoy this very much. Thanks for being on the show, and I’m sure we’ll catch up shortly.
Fred Florjancic: Greg, my pleasure.
Greg Alexander: Okay, take care.
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