Last week I attended the CEO Forum hosted by 1012 Magazine in New Orleans. Being a CEO myself and assessing CEO’s on a daily basis as part of my analysis of potential investments, I was intrigued by the opportunity to attend an event called the “CEO Forum.”
The event was meant to promote business and the improvement of the community along the I-10/I-12 corridor, which is a stretch of highway in Louisiana that encompasses Lafayette, Baton Rouge, New Orleans, and Covington/Mandeville. Having been born, raised, and still living in Baton Rouge, I would obviously like to see this area continue to grow and to improve. However, it became apparent as I listened to these CEO’s speak that the biggest take-away from the event was how a good CEO who truly understands business can apply those business concepts to help solve non-business problems.
1012 Magazine pulled together an impressive panel of local executives. J.R. Ball, executive editor of the Baton Rouge Business Report, moderated a panel discussion with four CEO’s from the I-10/I-12 area. The participants included Dr. Patrick Quinlan, CEO of Ochsner Health Systems, Gregory Rusovich, CEO of Transoceanic and Development Company, Jacqueline Vines, senior vice president and general manager for Cox Louisiana, and Matt Wisdom, CEO of Turbosquid.
All four panelists have been heavily involved in the community in addition to managing their respective businesses, so each had firsthand knowledge on a number of issues and keen insight. What stood out to me most, though, were the thoughtful responses from the only two gray-haired panelists, Dr. Quinlan from Ochsner and Mr. Rusovich from Transoceanic Trading and Development. Both men have impressive tenures atop their respective companies.
Dr. Quinlan was named CEO of Ochsner in 2001 after being Chief Medical Officer for the previous three years. He helped build up the company since then and was even named the #1 most powerful physician executive in the nation by Modern Physician magazine in 2007. Ochsner is a seven-hospital, non-profit, academic, multi-specialty, healthcare delivery system dedicated to patient care, research and education.
Mr. Rusovich became CEO of Transoceanic in 1991, developed the company’s “go global” strategy, and succeeded in launching 25 global offices. Transoceanic is an international consulting firm that connects sellers of equipment, technology and services to prospective buyers in the world’s emerging market. In addition to growing the company into what it is today, Mr. Rusovich also serves as the Chairman of the New Orleans Business Council and the Chairman of the Metropolitan Crime Commission. He has been recognized for his business and community efforts with numerous awards, such as the Ernst & Young Entrepreneur of the Year Award in 2000.
Having been highly impressed by their biographies, I was certainly eager to hear what they had to say. It struck me how consistently they both applied the concepts that made them successful in business to the problems discussed. I would like to discuss the three examples that stuck out the most to me.
Actual Item Discussed: Recent National Healthcare Reform
Business Application: Understanding how to permanently solve problems
Dr. Quinlan noted that the recent healthcare reform does not address the root of the problem, which is an increasingly sick country. The healthcare reform has been about controlling costs. However, the higher healthcare costs are driven by unhealthy lifestyle choices, such as smoking, lack of exercise, and obesity from poor eating habits. Until lifestyle choices change, healthcare costs will continue to rise.
Whether or not you agree with what is causing higher healthcare costs and how best to address it, there is a business lesson to be learned here. No problem can be solved permanently until the root of it is identified and addressed. I am reminded of the TV show Kitchen Nightmares where Chef Gordon Ramsey goes to a struggling restaurant and tries to turn it around within one week. The first thing he normally asks the owner is, “What is the problem?” The answer is almost always something along the lines of, “We do not have enough customers.” Chef Ramsey is always frustrated by this response because “not enough customers” is obviously not the root of the problem. Focusing on that fact will not turn around the restaurant. The key is to figure out what part of the restaurant is keeping people away. Of course, by the end of the episode, the Chef Ramsey has convinced the owner that the food, décor, or the owner himself is the problem causing “not enough customers.”
I see this issue all the time in my analysis of various businesses. In management’s efforts to justify failing to meet analysts’ estimates, they often blame some “one-time event.” It is amazing how that “one-time event” seems to occur every quarter. Clearly something is fundamentally flawed in the way they are projecting estimates, but they fail to understand the root of the problem and adjust accordingly.
Other examples include management constantly restructuring operations, constantly rolling out a new marketing campaign, constantly spending money on R&D with nothing to show for it, constantly writing down goodwill or intangibles from previous acquisitions, etc. The companies that perpetually take the same negative actions are merely applying band-aids to a wound that requires stitches in their attempts to fix the problem. Their efforts will never have a lasting impact until they fully understand what is causing the undesired results.
Actual Item Discussed: Public/Private Partnerships
Business Application: Maximize results, Good to Great style
Dr. Quinlan noted the great job that Michael Hecht and the Greater New Orleans, Inc. (GNO Inc.) have done in improving the business environment in the region, creating opportunities, fostering growth, etc. He credits this success to decisions made at the beginning of Hecht’s tenure. First, the business community and GNO, Inc. decided what they were not going to do. Then they decided what they could be good at and focused on those areas.
Upon hearing this, I was immediately reminded of Good to Great, that incredible book written by Jim Collins on taking a good business and making it great. I just happened to finish reading that book for the second time. In Good to Great, Collins and his team identified companies that experienced average to subpar results relative to the stock market as a whole over a period of at least 15 years followed by a period of 15 years during which the company beat the return on the stock market by a factor of three. Of nearly 1,500 companies analyzed, only eleven total companies fit the criteria. As part of the analysis to determine what made these companies go from good to great, Collins and his team also identified comparison companies to contrast the good to great companies against. The comparison companies were in the same industry and in similar circumstances as the good to great companies, but experienced markedly different trajectories then their high-flying good to great peers.
As part of the analysis, Collins and his team spent five years determining what the good to great companies did that the comparison companies did not. Two of the most important decisions made by the good to great companies were mentioned by Dr. Quinlan in his discussion of the public/private partnership.
One of the first decisions made by the good to great companies was to determine what to stop doing. Sometimes what we are doing can be just as big an impediment to success as what we are not doing, so deciding what to stop doing is a logical and important step in improving results. Yet the comparison companies in the book somehow missed this step. They made no concerted effort to stop doing the wrong things while their more successful peers did.
The second major decision made by great companies that Dr. Quinlan touched on was to focus on what they could be good at. Jim Collins in Good to Great took it a step further and noted that the great companies focused on what they could be the best in the world at. Again, this seems highly logical yet the comparison companies in the book failed to make the connection. Unless you can be very good at something, how can you hope to effectively compete? I would love to be an NFL quarterback, but there is no way I could ever be good at that endeavor. So why would I waste even one minute working towards trying out for an NFL team at the quarterback position? I think just about every out-of-shape football fan like myself can understand that extreme example, yet businesses around the world do its equivalent everyday and wonder why they are not more successful.
To summarize, the first business lesson from this example is to figure out what you are doing wrong and to stop doing it. The second business is to only focus on those areas you can be very good at.
Actual Item Discussed: Rejuvenation of New Orleans Post Hurricane Katrina
Business Application: Incentives Drive Results
Mr. Rusovich was the first panelist to chime in on moderator J.R. Ball’s question about why New Orleans is thriving when so many predicted that the city would be dead for years after the devastation caused by Hurricane Katrina. Mr. Rusovich, who has seen the rejuvenation first hand via his own business and his involvement on numerous boards and activities within New Orleans, confirmed that there has been improvement across the board in New Orleans. He attributes this unexpectedly quick renewal of the city to quality of life issues. Basically, he believes that people did not like what they saw post-Katrina and were not willing to sit idly by. They were highly motivated to improve their own quality of life. As a result, business returned and much of the destruction was cleaned up more quickly than most imagined it could be.
I believe this highlights a fundamental truth of human nature and what drives success in a capitalistic environment. Incentives drive results because people are driven by incentives. If you want to get the best out of any organization, you have to have the right incentives. I personally believe that the appropriate culture can go a long way towards creating the right incentives. The example given above showcased an environment that was so bad that the people trapped in that environment were incentivized to improve it so that they could better enjoy their own quality of life. In a corporation, however, good employees tend to leave when the environment is that poor rather than stick it out to improve from within.
On the other hand, a good culture, which rewards the right behavior, usually creates a positive work environment that draws the right people who are incentivized to maintain that culture because it allows for a more enriching work experience. In other words, a good culture creates a self-sustaining incentive system that helps drive the strong performance. Obviously, the right compensation system also helps.
While I digressed about the importance of the appropriate culture, the point is that the right incentives are key for achieving the desired results. Extraordinary circumstances, such as a devastated New Orleans post-Katrina or, conversely, a strong culture, can propel an organization/entity to reach the desired results more quickly.
In the interest of full disclosure, I look for business lessons in just about everything I encounter. However, in this instance I think the business lessons gleaned were not much of a stretch. I am thankful that 1012 Magazine put together the event and am appreciative of all of the CEO’s sharing their unique insight. I am particularly grateful for the gray-haired CEO’s out there willing to share the benefits of their vast experiences. I look forward to similar opportunities in the future.