How To Turn Around A Struggling Business
Bob Evans Farms Inc. is a publicly held restaurant and food products company, with sales of approximately $1.5 billion based in Columbus, Ohio. That’s what it is today. But, it didn’t start out that way. It started out as a single truck stop diner near the Bob Evans Farm in Rio Grande, Ohio, which is just north of Gallipolis, Ohio. The restaurant chain started after Bob Evans kept hearing patrons at his truck stop say that they thought his sausage was the best around. Bob slaughtered and packaged his own sausage using a unique recipe, but did not have the manufacturing capacity to fill large orders. He made a business arrangement with his cousin J. Tim Evans who was then the owner of Evans Packing Co. to package the Bob Evans Sausage products at Tim’s plant. The rest is history!
But it hasn’t always been smooth sailing even after growing to be a billion dollar company. Profits began falling in 2001. By August of 2005, corporate profits had dropped in eight of the previous nine quarters. The CEO at that time resigned, and Bob Evans was under interim leadership until the company hired Steven Davis, the former president of Long John Silver’s, as CEO in May 2006.
Davis’ road was rough. He had a great deal of ground to make up if the Bob Evans Farms brand was to continue to thrive. Smart Business did a cover story on Davis and the story of how he revived this struggling business. I realize that a $1.5 billion company may not repreent the business you operate. But the problems you face are the same as the problems Davis was confronting. The solutions are the same as well. The report summarizes Davis’ starting point with Bob Evans Farms like this–
“Same store sales, one of the most relied-upon measures of financial health in the restaurant industry, had been falling steadily for two years. Restaurants were closing. Shareholders were unhappy. His predecessor, Stewart Owens, had stepped down after profits fell eight out of nine quarters prior to his resignation, and net income in fiscal 2005 had dropped 48 percent from the previous year. The only bright spot was sales, which were growing, but at a lackluster, single-digit pace.”
So, Davis’ work was cut out for him. What follows are excerpts of the story of how he turned things around-
Find a better course
Davis wasted no time bemoaning the situation at hand when he accepted the top post of the underperforming restaurant and food product chain. He knew decisive action was needed and that he couldn’t turn around the company alone. So he set out to meet the crew. “In my first six months on the job, I hit about 100 restaurants,” he says. “In the first nine months, I visited all of our plants. “I had to be visible. I talked with managers and asked them three questions: What do you like about working at Bob Evans? Where can we improve? And what would you do if you were me?”
He got some interesting answers. “I heard everything from new product ideas to how we should control our development, to wanting to better understand how to track our business, to what kind of Christmas party we should have,” Davis says. “Everybody has different points of emphasis. But it created an environment of really listening to the people closest to the action.” It also helped him lay the groundwork for some sweeping changes.
First came a change in management compensation. “You have to be tough-minded about performance and link your pay to clear metrics that are a stretch for the organization but are still achievable,” Davis says. “It’s a simple principle: Things get better; people make more money.” Davis started by linking officer compensation to specific company goals and used a cascade process to bring the system to other levels, including restaurant and plant managers. Individuals eligible for performance-based pay are measured against each metric twice annually–once at a six-month check-in to see how they’re progressing toward each goal, and once to determine if they’ve met each goal and, thus, qualify for the incentive pay. “It’s almost like taking the SAT: Here’s the metric; here’s your score,” Davis says. “That makes it relatively easy to say, ‘Here’s where I did well, here’s where I didn’t do well and here’s where I have to do better.’”
Performance metrics are linked directly to the other big change that Davis instituted in his first few months on the job. “Within the first 30 days, I said, ‘We don’t have a strategic architecture,’ so I took that very seriously, and we crafted our BEST Brand Builders,” Davis says. The acronym BEST stands for Bob Evans Special Touch, but essentially, the brand builders are a five-pronged strategy for rebuilding Bob Evans. They are:
–Win together as a team.
–Consistently drive sales growth.
–Improve margins with an eye on customer satisfaction.
–Be the BEST at operations execution.
–Increase returns on invested capital.
“It’s hard to argue that these aren’t things you need to do to build a business,” Davis says. “They’re very clear measures. And each of the five Brand Builders are tied to incentive pay. I think everybody bought in to it. It gave us a road map to follow.”
Communicate your plan
Once the direction was clearly set, Davis’ next task was to “broadly and boldly” communicate the five BEST Brand Builders to the more than 50,000 employees throughout the Bob Evans system. “We’ve got people working in plants, we’ve got people working in restaurants, we’ve got satellite facilities, we’ve got people in California, people in Ohio,” Davis says. “We had to find a way to connect with all the different constituent groups across the country.” Posters, mouse pads and other assorted paraphernalia were emblazoned with the five expectations set forth in the Brand Builders. Davis began hosting departmental lunches and companywide meetings to reinforce the importance of the Brand Builders. “It’s a way to motivate and get people energized around the Brand Builders,” he says. “They’re the key to our future success.”
In addition, Davis now has his own corporate blog within Bob Evans. “I have a blog where people can go online and ask me anything,” he says. “People want to know what’s going on in their company.”
Despite all the improvements in internal communications, what probably speaks the loudest to employees is seeing actual results. “The first half [of fiscal 2007] was pretty rough,” he says. “But the second half was really strong. That’s when the business started to turn and cash flow started getting better, and we started being smarter in where we were spending and investing our money….We went from restaurant openings as a birthright to whomever has the best return on investment will get new capital in the future,” Davis says. “If we want to improve shareholder value and drive stock price, we have to be great at return on value. “I think the majority of people understood what we were trying to do [with the Brand Builders]. But we started really hitting our stride when we started getting results. When that happens, people start to realize these Brand Builders really do make sense.”
Get buy-in at the top
Communicating with shareholders and board members was also a vital part of Davis’ turnaround plan for Bob Evans. After all, measurable change was going to take time and shareholders had already run out of patience with Davis’ predecessor. “One of the first things I did was visit some of the top shareholders,” Davis says. “I said, ‘Here are my thoughts on the business. Give us time to craft a strategic plan.’ When we came back with the Brand Builders, I think they saw we were serious about performing. Then, when the results came, that spoke loudly. “The best way to earn the support of shareholders is to show progress in operating results, and our Brand Builders generated improvements shortly after we implemented them.”
As for the Bob Evans board of directors, Davis was careful to get alignment with them on the direction he was sailing before he got too far. “You have to make sure you have a direct line with the board,” Davis says. “Change starts at the top.” Board members were very receptive of the Brand Builders concept, and together with Davis, they crafted a five-year strategic plan to further solidify Bob Evans’ course. “Everybody rallied around it,” Davis says. “We are headed in the right direction today….”
The clearly humble Davis says what he has done with Bob Evans isn’t so extraordinary. It’s basic change management. “You start with a plan, you communicate it, you get alignment from your key stakeholders and your board, and then you don’t waiver,” he says. “You have to keep driving it.” There is, after all, still a long way to go. Although sales and net income are still plodding along, same-store sales have rebounded into the positive column and cash flow has improved dramatically. So much so, in fact, that the board of directors has authorized the repurchase of up to 3 million shares during fiscal 2008 on top of the 2 million shares repurchased in fiscal 2007.
Shareholders are regaining confidence in the brand, and employees seem to be encouraged, too. “I’m seeing people smiling a lot more,” Davis says. “It’s a reaffirmation that we’re at least trying to move in the right direction.” But it’s just the beginning. “I’m one of those happy-but-never-satisfied guys,” Davis says. “You can never rest on your laurels and think your turnaround is complete. There’s a fine line between positive and negative sales, so you can’t become the least bit complacent. There are a lot of external factors out there. You have to always be on your game.” Still, the progress he’s seen is encouraging. “When you see it work, it’s so rewarding,” Davis says. “When you sit in a meeting, we’re not challenging which direction we’re going anymore, we’re challenging the best way to get there.”
Contained in this story are the basic building blocks to revive any struggling business. Whether you are a sole proprietership or a fortune 500 corporation, these principles will work if you incorporate them into a plan and assemble a positive and hard working team.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
