DRG Memo

Five Pillars for Leading the Client-Focused Organization

by Joseph Neubauer

Reprinted by Permission. Leader to Leader, No. 30 Fall 2003. www.leadertoleader.org. For additional Leader to Leader information contact them at jbsubs@jbp.com or (888) 378-2537.

What's the secret for building enduring client relationships? How do you make these relationships the cornerstone of your company’s reputation in the eyes of employees and investors as well as clients? And how do you avoid being overtaken and marginalized by shifting competitive forces to consistently offer superior value to clients? During 20 years as a chief executive, my answer to these questions has never been so simple or emphatic as it is today. It consists of five precepts or pillars: Surround yourself with good people. Invest in them. Listen to them. Align culture and mission. And keep your commitments.

Simple in concept, the five pillars are complex and difficult to execute with competence and constancy as market conditions and strategies shift. They surface conflicts, threats, opportunities, and choices at all levels, and require balancing competing priorities. They demand letting go of strong opinions when new circumstances and events raise doubts -- and suggest better options. They can require abandoning a prized objective abruptly, potentially at a cost of substantial political capital or millions of dollars. They call for confronting an associate when performance is off course, and occasionally for parting ways with respected, even trusted, colleagues. The five pillars push leaders to create systems and processes to stimulate and discipline an organization into examining what it holds most important, most effective, and most rewarding. The leadership group’s success in keeping these elements in balance shapes the group’s ability to lead for the long-term -- to build and sustain a healthy organization.

Surrounding Yourself with Good People

We are known by the company we keep. What we stand for has a lot do with the kind of people we hire, seek out as advisers, and recruit as board members -- and profoundly influences whether outsiders will vouch for us. Client-focused organizations like ARAMARK have many customers available to speak for them. We deliver services to clients who are increasingly outsourcing these non-core elements of their business functions and processes. Companies like ours -- those that aren’t propelled by high-tech R&D or other game -- changing innovations -- cannot rely on small groups to deliver silver bullets for future success. For us, there are no silver bullets.

New leaders must be recruited continuously whether a strategy is working well, about to be recast, or in crisis. We continually seek outside talent. When we find it, we create jobs for these gems if the right ones don’t exist or are not available. To measure our effectiveness in recruiting and retaining talented people, we track turnover very closely among the top 250 people in the organization to make sure we excel at keeping our best leaders in the fold.

No organization can afford to be arrogant about its talent.

Talent always has options, and is in short supply. If an organization cannot attract and keep talented leaders, how can it continue to compete effectively? No organization can afford to be arrogant about its talent. Talent will flee for better opportunities. When leaders adopt a new strategy, they have to ask: Realistically, are the people who got us to where we are now the right ones to get us where we need to go? Good leaders are able to shed past approaches, adapt to new circumstances, and refocus on new priorities. Good leaders also know how to identify people in an organization who have the fresh ideas, energy, vision, experience, and commitment to help lead the charge up the new hill.

A final point about good people. Any consideration of effective leadership must emphasize moral qualities: humility, integrity, high ethical standards, and trustworthiness. In a word, character. The focus on integrity and ethical behavior by top leaders is important in every organization.

Investing in Your People

We could not have attained the levels of respect we currently enjoy among our peers and other members of the outsourced services industry if we had not reinvented our company twice in recent history. During both these critical periods, we resisted courses of action that might have led me and my top leadership team to justify a more controlling and less inclusive culture. Instead, in each case we developed a specific client-directed mission to focus our people on improving performance and results. In the first case, in the early 1990s, sales growth had stalled. We had become too focused on operational efficiency and cost-cutting. The question in my mind was whether the people who had gotten us to that point could make the change to get us to the next level. We agreed the group could be motivated and they would want to make it happen for us. And we invested heavily in training, development, and communications.

Rather than sanctioning or reverting to a hierarchical, controlling culture, we encouraged and supported 1,000 of our leaders to open up internal debate and discussion. To focus our leaders on growing the business, to go beyond running the business units with just a lean, operational focus, we had to shake up the culture to build collaborative ties and create a "growth culture" across all our business lines. If we did this, we could broaden and deepen client relationships by providing a wider variety of services that, in turn, would help solve more of their problems. We set a five-year objective to increase sales at an annual pace of approximately 10 percent; a "stretch target" that we reached by 1999.

Listening to Your People

Once you’ve surrounded yourself with good people, listen to them.

Talented people don’t want you to come to them and say, "Here’s what I’m going to do. What do you think?" They want you to set up issues in terms of, "Here are the challenges we face. What do you think?" If you harness their intellect this way to help solve a problem, they will reach out and help you. Once you’ve surrounded yourself with good people and are investing in them, you need to listen and respond to them, even when they give you answers you’d rather not hear.

When we first grappled with projections of slow-to-no revenue growth in the early 1990s, our clients and our employees were great resources for helping us elude this downdraft. By listening to them and earning their commitment, we identified opportunities, reshaped our culture to embrace innovation and pursue growth, and got back on track.

Clients told us that we had differentiated ourselves by putting great emphasis on responsive, strong relationships and being true partners. They liked our business model and urged us to sustain and broaden our outsourcing capabilities. They told us, however, that we had an outdated image that did not fit our style of business and likely discouraged many opportunities for new business and increasing revenues.

In turn, we asked 8,000 employees to help us recast our company’s image through a rebranding program. We put concepts in front of them over several months in search of some common language that would capture their sense of what this company was all about -- from those on the front lines with clients all the way to headquarters. Overwhelmingly, they picked the same kinds of things: long-term relationships with clients, creating value for them, respect for the individual, personal and professional growth. The vision and guiding principles we have today reflect this. They are expressed in a collective voice, not a top-down voice.

Aligning Culture and Mission Through Leadership Development

Leaders at all levels have to get buy-in or they can’t lead. They have to be patient, clear, and persuasive to capture the hearts and minds of their followers. A major part of the leader’s role is to set a clear vision and strategy, assemble a cohesive team to show the way, communicate consistently, celebrate success, sustain a sense of urgency on the important issues, and keep the organization on course -- or change course in advance of threatening shifts in the environment. Teaching and coaching these and other core leadership beliefs is a key function of our leadership development programs. Leadership development is the central platform for aligning our leaders and culture with the business objectives.

I wasn’t always convinced that formal leadership development programs are worthwhile: they can be expensive in both dollars and executive time. But once I observed the passion and intensity among our own people about what our company could stand for and where it should go, I became a believer. If you can get your top people to engage over what is required to take the organization to the next step, give them some tools and processes to do that, make it real through action learning projects, and align these activities with the broad mission of strengthening client relationships, then you are taking big strides.

ARAMARK’s Executive Leadership Institute (ELI) uses action learning projects to apply and develop the five pillars in many ways. Teams of 4 to 6 managers in each class of 30 participants are assigned a case study of current policy or strategy issues as prepared by different business units. To encourage fresh thinking, the project teams are assembled from disciplines and business units across the organization. They cannot include anyone from the specific business unit that prepared their case. They present findings and recommendations at the conclusion of four week-long sessions scheduled over nine months. The audience includes me and other members of senior leadership, heads of the specific business units sponsoring the project, and other members of that particular class. Project teams are assigned a coach and liaison from the sponsoring business unit. More than 1,000 high-potential front-line managers, plus all senior executives and business leaders, have participated in this program since we created it in 1993.

These sessions have been vital in transforming our culture because they granted permission for, and modeled the behavior of, open dialogue and debate. My senior leadership team has never missed a presentation of a final report, our signal to current and future participants that these discussions are of great import. When an organization’s culture is hierarchical, people who challenge the system generally are discouraged or disciplined in some manner. Our ELI was a way for us to break down barriers, to facilitate the internal trust we need to realign the culture with changing business objectives.

Managing debate is a core competency of adaptive organizations.

There is always a blend of drama, tension, and excitement near the surface when the Action Plan final reports are presented. Managing debate, discussion, and resolution is a core competency of adaptive, industry-leading organizations. Andrew Grove at Intel, Jack Welch at General Electric, and Lou Gerstner at IBM all were leaders who promoted cultures of rigorous intellectual debate and, in turn, intense focus and commitment.

At times, Action Plan final presentations and debates can get contentious. We’re all there to solve a real problem. I challenge people. My senior leadership colleagues challenge people. Most participants understand it is not personal and that the give-and-take is essential to build consensus around best-possible solutions. If someone’s thought process is loose, or they are not sharp with their facts, it will usually become very apparent. On the other hand, of course, we’re always scouting for talent. These sessions are great opportunities for up-and-comers to get on our radar screens.

Our responsibility as leaders is to make sure the organization is strengthened by the results of these processes, not fractured by it. The objectives are to identify good people and support their professional development, to enable them to have an impact on important issues, to set in motion action steps that demonstrate conviction by senior leaders to change specific strategies and tactics, and to reinforce the organization’s commitment to its mission, values, and principles.

In the very first year of ELI, one business unit leader protested recommendations aimed at his business unit and questioned why the issue was even up for discussion. "You’re trying to get my people to think," he complained. "I don’t want my people to think. I want them to do. I want them to execute. That’s what this business is all about." The room went deathly silent for several moments, then erupted in argument with our top leaders deeply engaged. Yes, we have to execute; it’s the essence of our business. But if we want to grow, we’ve got to build some systems and processes to help people look for opportunities, and to build stronger relationships with customers. That was the outcome.

Some months later, that irritated business manager decided to leave the company. It was an amicable departure, right for him and the organization. This kind of separation is a healthy process, a normal outcome of aligning your culture to support shifting strategies. It would have sent a mixed message, at best, to tolerate an outspoken command-and-control-style leader during a period when we were saying far and wide that the organization had to open up to encourage debate, innovation, and growth.

Keeping Your Commitments

Long-standing client relationships are the essence of our brand equity and our distinctive value as an enterprise. ARAMARK has been in business more than 65 years. Many client relationships exceed 30, 40, even 50 years, dating to when our founder ran a peanut vending business out of the back seat of his car.

The highest compliment anyone could give us, whether a client, investor, creditor, or our own employee, is, "You guys have done everything you said you would do." Every promise is a verbal contract, a commitment. We monitor each client account every month. These relationships are a great legacy and a very valuable franchise. The average contract is almost 10 years old.

You can create only so much value by becoming more and more efficient.

Historically, we were one of those companies that saw no need for vision statements. Our view was, just manage all the businesses well and keep this thing going. But that changed once we understood that no matter how efficiently we operated, our aspirations for a healthy, vibrant organization could not be achieved without a long-term commitment to growth. You can create only so much value by becoming more and more efficient at what you already do. At some point, you must incorporate competitive best practices and provide broader and more innovative solutions at a faster pace than competitors. If you do, you retain and add customers.

After jump-starting our transformation programs in the early 1990s, we saw that as leaders redefine strategic priorities, in our case adding "increasing revenues" to "operating efficiency and cash-flow improvement," they redefine the mix of behaviors they must be alert to reward. This adjustment is just part of delivering on the organization’s commitments to employees. The leaders also must be alert to redefine the organizational culture so it best shapes and supports these behaviors. Today we want people in our organization to look at everything important around them -- personalities, symbols, leadership communications, celebrations, promotions, dismissals and departures, and so on -- and understand that the culture is pointing in the same direction. The same message from the top gets reinforced over and over. People realize then that the new and evolving programs, the values, the priorities, the rewards, and the penalties aren’t going away.

When you keep commitments with clients, your relationships evolve into growing partnerships focused on solving problems and characterized by great mutual confidence.

Joseph Neubauer, chairman and CEO of ARAMARK Corporation, has made long-term client relationships the signature focus since becoming CEO in 1983. Annual revenues have tripled to $9 billion in this period, while retention rates for existing clients currently run at 95 percent or higher in varied business units. In 2002 and 2003, Fortune magazine ranked ARAMARK among the leaders in America’s Most Admired Companies and number one in the category of Diversified Outsourcing Services. (9/2003)