Two years ago, Seattle office space company Apex Facility Resources was experiencing growth but not achieving the level of profitability it expected for the time and money being invested. This situation is not uncommon. Many companies with growth spurts lack the infrastructure to support that growth.
Apex CEO Marlaine McCauley knew something was broken, but she wasn’t sure how to fix the problem. When she delved deeper, it became clear that several key areas were causing margin erosion.
• Low morale. There was a divide between the company’s sales representatives and the service department. Also, a lack of specifics governing the handoff among different divisions involved in each client transaction resulted in a blame game that reduced productivity and contributed to morale issues.
• Lack of focus. Too many employees were distracted by tasks that weren’t mission critical. As a result, many initiatives never came to fruition.
• Binge hiring. The firm was adding new staff but there were no training programs to introduce them to the company culture. The CEO had never brainstormed with new management and sales teams about goals and growth strategies.
• Employee turnover (the silent profit killer). Every time an employee left, it cost Apex 1.5 times the person’s salary to cover the costs of restaffing, and that expense affected the bottom line. At the time, turnover was up to 30 percent annually, significantly reducing profits.
Fast-forward to 2010. At a time when competitor profits were down 40 percent, Apex posted a 90 percent increase in revenue, and its profit margin rose to 60 percent. How did this happen?
First, to address the disengagement and distrust among employees, the company developed “The Apex Way”—a series of processes, procedures and policies that aligned teams and brought everyone on board. McCauley increased the number of one-to-one meetings with employees to discuss performance and other communications issues. She scheduled quarterly all-hands meetings to recognize employees and share good news and updates about the business, including a “profit culture” launch party featuring high-end door prizes and a cash bonus for every employee.
Second, Apex selected three primary areas for strategic initiatives, focusing all employees on executing tasks and reaching goals relevant to those initiatives. A more narrowed focus allowed everyone to achieve successful outcomes quickly and with more satisfaction.
Third, to avoid binge hiring, Apex used both industry standards and its own definition of cultural fit to guide hiring decisions. Preparing clear performance standards and job folders allowed supervisors to get people on board quickly. If a hire wasn’t the right fit, they could more quickly say, “This isn’t working.”
Fourth, McCauley and her team instituted practices that set clear expectations for employees, gave them frequent feedback if performance needed to be changed and realigned duties when appropriate.
Once these issues were addressed, the clean handoff among different units and levels across the organization improved because communications were streamlined, more efficient and respectful. There were fewer misunderstandings and blow-outs; better relations facilitated improved communications among all divisions.
McCauley says that stepping back, taking time and thoughtfully reassessing Apex’s business model will sustain Apex’s profit culture and keep it ahead of the competition for years to come.
Libby Wagner, president of Seattle-based Libby Wagner & Associates (libbywagner.com), is the author of The Influencing Option: The Art of Building a Profit Culture in Business (Global Professional Publishing, 2010).