Cultivating the Cultural Side of Business
Chris Carlson founded Sportech, Inc. out of his home as an aftermarket recognized leader in the power sports industry. Worth over $20 million in sales, the 90-employee company provides thermoformed plastic products to internationally known OEMs in the power sports business. Carlson recently gave a presentation at an EnterpriseMinnesota business conference on supply chain management at the University of Minnesota. Carlson attributes much of his company’s success to an acute awareness of the many “soft issues” in business and a dedication to preserving and promoting a clearly defined company culture.
Enterprise Minnesota: The soft issues are oftenoverlooked in business, yet you freely point to them as key advantages for Sportech. Tell us how you have approached this through the years and why it’s been a priority for you.
CC: I’ve never really liked referring to them as “soft issues,” because “soft” implies that they are insignificant. The reality is, I can’t think of anything more important than the culture that we’ve created and maintained through the years at Sportech and our approach to many of the soft issues we face on a daily basis. From the very beginning, we’ve tried to build the company with an operational philosophy, which is grounded in integrity, and we’ve used this as a basis for creating our culture. We have always placed a priority on the hiring process, and we’ve tried to build a team with people who share common values and who are passionate about our industry. My hope was to create a culture that would eventually become a real statement about who we are as a company. Culture is one thing I’ve really tried to keep constant through the years. As the company has grown, my role has changed and I’ve been forced to delegate or “let go” of a few things— which is pretty tough for Type A’s like me to do. But I’ve maintained control of the corporate culture piece, and it’s one area that I won’t let go. I really believe that culture is a top-down commitment; it has to start with me and I’m accountable for maintaining it.
Enterprise Minnesota: You said that you believe that one of the key advantages that Sportech has in the marketplace is its culture. How so?
CC: Most manufacturers today are trying very hard to establish a clear point of differentiation with their customers, and product innovation is an obvious area of focus. At Sportech, we like to think of ourselves as a wildly innovative, creative company. But our cultural strengths are just as important as our other advantages—including design, delivery, quality and price. We believe that our strongest customer relationships have been built largely with trust. If our products, services and prices are equal to those of our competitors, but the customer is more comfortable with us or trusts us because of our corporate values or our approach to business, we’ll get the job every time. I also believe that most companies want to work with suppliers of integrity, where the people understand right from wrong and where they’ll give you honest answers, even when it’s difficult to do so. The value that a culture of integrity brings to a supplier/customer relationship is vastly underestimated by most suppliers today.
Enterprise Minnesota: Why is it important for a business to align its culture with the culture of a potential OEM?
CC: If you have built your company’s culture on integrity, then I think it’s important to try to align yourself with an OEM that has similar values, because if you go into a situation with an OEM that doesn’t share your values, you could be entering into a no-win situation. Nearly all companies make some kind of a statement which portrays them as a company guided by integrity, but in some cases this philosophy doesn’t always get carried through to the everyday operation of the company, and that’s fine. We have been blessed at Sportech to work with some great OEMs with cultures centered in integrity, and working with them has actually made our culture stronger. The question is, are you prepared to do business in a setting where there’s a possible misalignment of cultures—where your values are vastly different? And of course this goes both ways—if you’ve struggled with your own internal culture and you are not sure if your whole team fully represents your values, are you prepared to engage with an OEM with a strong value system and a history of doing business as a company of integrity? Either way, it’s a recipe for disaster.
Enterprise Minnesota: Any tricks you’ve learned that have helped you assess whether or not there’s a potential fit with a customer?
CC: I think that observant CEOs can easily determine the compatibility of a prospective customer with some basic research on the company. One of the things I always look for is consistency in people. If you see people within the organization with similar values and with a similar approach to business, chances are this is more than a coincidence; it’s an initiative from the leadership of the company. We’ve found that it’s much easier to deal with consistent people who understand the goals and objectives of the company that they are working for. If there isn’t clarity in this area, it makes it very difficult to be successful for suppliers because there are a variety of measurements being used. Perhaps the most effective way to learn about the culture of an organization is to simply sit down and ask some of the employees. Do they like their job, the company, the direction the company is moving? Are the corporate goals and objectives clearly defined to all employees? Do they feel that they have an opportunity to contribute to these goals in their roles? It’s amazing how much you can find out about a company just by asking a few questions of the folks that work there.
Enterprise Minnesota: Beyond the résumé, what should a company consider when hiring new employees?
CC: I often refer to our culture at Sportech as the company’s foundation—it’s that important to us. If this is something that we are going to cast in stone as a core value, then we should be committed to bringing in the right people to sustain it. We look for “who” before we look for “what.” In other words, we look at the person, who they are and what they stand for, before we look at specific skills or core competencies. There are lots of talented people out there, but only a few talented people who also happen to align with our corporate values. This is especially important with salespeople and others who have direct contact with customers. Again, it’s the responsibility of the key leaders in an organization to clearly define the values, what they mean and how the company puts these values into the company’s daily operation. When these values have been solidified, then the hiring process takes on a whole new level of importance. Corporate commitment to excellence starts with the hiring process. I really believe that the best companies have a tendency to over-hire. They bring in overqualified people and surround themselves with excellence. Then, when the company grows, they are far better equipped to deal with it. One hard lesson that I learned early on was the difference between knowledge and wisdom. One of my favorite sayings is “wisdom is knowledge with a drive train.” I’ve hired people who could spew lots of facts—think Cliff Clavin—but were lost when it came to the wisdom of applying that knowledge at the right time and place. They were strong in theory but had a hard time gaining traction when it came time to produce. I’ve learned that wise people are far more effective in the real world, and even though they are much more difficult to find, you are always better off holding out for wisdom than settling for knowledge. Finally, know that your OEM customers are watching as you build your team. I also encourage periodic meetings with my customers in which we very openly discuss how our two teams are working together. It’s a great opportunity to get an honest assessment of how your team is interacting with the customer. If there is a problem, it’s far better to find out in this setting than to have things blow up on you later. I simply ask how we are treating the customer, and what we can do to bring more value as a supplier. And if they really trust me, my customers will give me an opportunity to critique their employees. The result is a situation in which you anticipate and fix smaller problems before they become big ones. One of the things I’ve taken away from these customer meetings is a sense of what kind of people we need to bring in to satisfy that specific customer. If you ask, they’ll usually give you a straightforward answer about what you can do to step things up from a service standpoint. The key then is to integrate this into your hiring process by making the necessary adjustments to better serve the account.
Enterprise Minnesota: Why is communication between the company and the customer so important?
CC: Deals are lost and relationships are severed because of misinterpretation—don’t let poor communication cause your downfall. Many CEOs spend hours poring over detailed financial statements, productivity reports and highbrow tactical approaches to manufacturing efficiencies, yet they dedicate almost no time to improving communication within their organization and with their customers. One of my frequent battle cries at Sportech is, “Our downfall shall not be caused by a failure to communicate.” Tell me the machine broke down, the material didn’t show up or even that we had a quality challenge, but don’t tell me we failed because of a breakdown in communication with the customer. It’s absolutely inexcusable in my book. Communication becomes even more important as we’ve reached a collaborative or strategic level in our customer relationships. As we work closer together, their expectations of us change, oftentimes requiring us to take on additional responsibility in the communication dynamic. One customer recently put a hold on a project late in the design process because of some changes being made in the product. We made the mistake of assuming that because the customer requested the changes that they would then communicate to the order fulfillment side of their business that deliveries would be delayed. We quickly learned that the customer expected us to handle this communication, because of the in-depth involvement that we had within their organization on this project. It was an obligation that we were honored to accept, as it showed trust on their part. Our mistake came when we assumed that they were handling this. It’s a mistake we won’t make again. Simple misunderstandings can quickly turn into nightmares for companies that aren’t paying attention. Rather than trying to guess, interpret, decode or read smoke signals, just ask.
Enterprise Minnesota: You mentioned that you believe companies with strong communication models bring more value to their customer relationships. Has this played a role in Sportech’s growth in the past?
CC: Absolutely! I really believe that today more than ever, OEMs are looking for suppliers who can bring the whole package to the relationship. That means they’ll need to meet every objective set before them by the OEM including competitive pricing, on-time delivery and exceptional quality. But, even if you have a pretty tight grip on these areas, you’ll still fall on your face if you can’t effectively communicate with the customer. It’s another one of those intangible, immeasurable deals where you can really set your company apart from others by demonstrating your commitment to effective communication. In the early years at Sportech, when we were first gaining some ground with a few OEM customers, we were competing with some real Goliaths in our industry. They seemed to have an irreversible stranglehold on the business we were fighting for. Eventually, we gained the trust of our customers, not with lower prices or some fancy new material, but by simply focusing on clear, concise communication. A couple of our competitors couldn’t get their message across, they didn’t follow up and they were famous for making assumptions, guesses and estimations when the job required facts. Now, don’t get me wrong here, we busted our tails to earn this business, but I still contend to this day that the communication piece—the soft issue that our competitors chose to overlook—was the difference. I firmly believe that communication is the great deal maker … and the great deal breaker.
Enterprise Minnesota: How can a company motivate its employees to be innovative?
CC: I think it’s critical to develop a culture of innovation and then apply it to all areas of your business. Innovation can’t just be what you do when business gets slow and you need to generate new revenues. It has to be the default setting for everything your company does, not just in design or new product development, but throughout the whole company. Innovation can transform a company if it is established as a core value, but the key is to sustain it and utilize it as a key driver. Our team at Sportech loves to innovate in every area, and it’s really expected at all levels of our business. We are finalizing our plans for a companywide move into our new manufacturing facility. I’ve been amazed at how my leadership team has developed a very cool—and very innovative— plan to pull this move off smoothly. They have a plan that is well thought out, and in doing so they have saved us a bunch of money and drastically reduced the amount of time that we will be shut down. They won’t win any awards for this innovation, but it sure will prove to be beneficial for the company, and it happened because our team instinctively turned to innovation as it faced the task, because it’s an integral part of our culture.
Enterprise Minnesota: So, you believe that a strong culture can actually be a differentiator for suppliers?
CC: You bet! I think more and more companies are starting to focus on culture and values within their companies, and in the process they are putting themselves in a great spot to effectively offer a clear point of differentiation. Why not focus on key cultural advantages within an organization such as passion, integrity, character and authenticity? Some might say that these traits sound elementary or obvious, but look around you and take note of how many companies have failed because they abandoned these basic, time-honored principles. If Enron had chosen to be authentic and honest, it would still be around and investors would not have lost millions of dollars. And with the surge of business failures resulting from unethical business practices, dedication to ethical business practices has never been more important.
Enterprise Minnesota: How can businesses maintain good relationships with customers when something goes wrong?
CC: One of my favorite authors is John Maxwell, one of the nation’s foremost authorities on leadership. In his book “Failing Forward,” Maxwell reinforces the importance of making the most of our failures. We all fail in business sometimes, but we don’t all learn and grow from our failures. We can either pack it up or quit, or we can learn from our mistakes, take accountability and get stronger in the process. One of our largest customers—a Fortune 500 OEM that watches its suppliers closely—tells us that the relationship we are enjoying with them today is partially because of how we handled a near disaster in the early stages of our relationship with them. On one of our first large orders with this customer, we shipped multiple truckloads of product to them with a hardware assembly that contained the wrong components. To make matters worse, the instruction sheet inside the assembly was for another customer, who happens to be a competitor of this customer. It was not a pretty situation!
We called the customer, identified the problem, proposed a corrective action plan and immediately went about fixing the problem. After the problem was corrected, we made some process changes, mapped them and demonstrated to the customer that we were confident that this simply could not happen again. The customer was firm yet incredibly fair in this situation, and we were able to not only maintain the relationship but we’ve been able to grow our business substantially with this customer. We failed forward in this instance, and the lesson that we learned was invaluable.