Facilitating Offsite, Retreat, and Board Meetings

Client GSC Logistics

In 1988, Scott Taylor and Andy Garcia left their executive jobs at two San Francisco Bay Area consumer goods distributors to set up their own firm. They have never looked back. More than two decades later, Scott and Andy have steadily driven their firm, GSCLogistics, to become the largest logistics provider at the Port of Oakland.

GSC today handles in excess of 15% of the goods that come into the port, third-largest international gateway on the West Coast. The firm has come a long way from its early years shipping Gatorade to Northern California food and drug stores, and has gained a customer list that includes some of the biggest names in retailing: Target, Walgreen, JC Penney, Crate & Barrel and many more. Yet despite building GSC into a $35 million business by 2010, neither Scott (CEO) nor Andy (chairman)were satisfied with their firm’s growth. In fact, they thought GSC should have grown much faster, but by the end of 2010, their immediate concern was enabling the firm to better manage their existing business.

Scott, Andy and their 15-member management team had scrambled to manage the biggest third and fourth quarters GSC had ever seen in its business. Shipping containers were flooding into their Oakland cross-docking facility at 30% over plan because a key customer, in an impressive vote of confidence, shifted its business to GSC from another provider in a different port.

By December, Scott decided the management team should hold an off-site meeting to review what went well, what didn’t and – most of all — what the firm needed to do in the future to accelerate its growth. The question would be who should lead the meeting.

Earlier in 2010, GSC’s chief financial officer, Joel Lesser, watched Rob Sher moderate an Association for Corporate Growth (ACG) panel of CEOs with a deft hand and with confidence. After hearing good things about Rob from others in ACG, Joel envisioned Rob leading the GSC offsite.

But Rob first had to sell himself to GSC’s two owners. Joel brought Rob in to meet Scott and Andy. After an initial discussion, Andy, who is skeptical of the value of consultants, challenged Rob: “How do you think you’ll be able to make our offsite more productive when you don’t know anything about our industry or our company?” Rob described his approach: before the offsite, he would meet one-on-one with each management team member to understand their issues and ensure they would be discussed at the offsite. The second benefit of meeting with the team in advance was that it would help Rob know far more about GSC’s challenges going in. He told Andy and Scott that letting an outsider without a vested interest run the offsite would be to their advantage – particularly an outsider with insider knowledge. All of that resonated with both owners.

Scott was especially impressed and excited about having Rob run the meeting. “He had a great way about him,” Scott says. “Rob was very calming and very, very engaging — not a hyper guy. The personality came through strongly, and I really liked him when I first met him.” They agreed to let Rob facilitate the off-site meeting to be held in a local hotel that December.

The meeting went exceptionally well, bringing a number of current and future growth issues into focus. “It was a very, very effective meeting,” Scott says. “Rob found a way to solicit opinions and get everybody engaged – better than if we had tried to do it internally. He is such a good people person that he can bring the personalities together, disarm everybody, and make them feel comfortable and have equal voices. It takes somebody outside the organization to effectively lead this kind of meeting. He’s a very calming influence. Nobody feels like they better be careful about what they say. He puts you at ease.” The team came out of the offsite energized and organized, with a list of action items to work on in 2011.

By February 2011, Scott was convinced the firm needed more of Rob’s help to continue the momentum of the offsite and focus the firm on growth. Scott voiced his concerns to Rob about GSC’s ability to grow at a faster clip. Says Scott: “I told him that we had to start thinking outside the box with the way the economy was going and our challenges in this industry, which is low margin and very competitive. I said that we had to do some things very differently and asked Rob whether he could help us out.” At the time, GSC was pursuing an acquisition in the Pacific Northwest, but it was getting harder and harder to expand its core business.

Scott and Andy’s first request was for Rob to help with the firm’s sales plan. But after listening carefully and thinking about the offsite discussions, Rob suggested he help them and their management team create a three-year business plan. “At first, we didn’t see the value in that,” says Scott. “But Rob said he had a way to create a one-page business plan. We’re now knee-deep into that exercise with our top six people, both sales and operations. It’s been an extremely enlightening exercise because it has focused us and helped our team members become much more open and transparent with each other. We’re starting to see the fruits of our efforts already.”

One of the ways Rob has helped the GSC management team is in learning how to evaluate ideas for growth. Rob demonstrated a systematic way to vet ideas without dampening managers’ enthusiasm for volunteering them. For example, one GSC team member suggested that the company not only deliver goods imported through the Port of Oakland but also handle goods to be exported through the port. Rob taught the management team how to conduct disciplined research to evaluate the idea, including determining the investment to implement it. They quickly realized that the export business would require specialized equipment, personnel with skill sets the company didn’t have on staff, and other big investments. They abandoned the idea.

But they didn’t reject the idea of expanding to an adjacent market segment. While researching the export plan, they realized that picking up or delivering domestic trailers at the railheads was not much different than handling their current business of transporting international containers. They even found another synergistic area of growth at their own deconsolidation facility. “Once we had filled a trailer to be shipped across the country on rail, we handed it off to another company,” Scott says. “We realized, ‘Why hand it off? Why don’t we take it to the railhead ourselves?’”

In logistics parlance, this is called the intermodal business. It’s become a new GSC division and revenue source, one that didn’t require significant investments. “It was the first time that our company had really analyzed a market segment and developed a plan on how to attack it – i.e., the people we would need, the systems and other investments,” says Scott. “Rob taught us how to create a rigorous growth plan.”

Part of the plan covers the integration of their first acquisition, which closed in June 2011. GSC acquired a Pacific Northwest distribution company called Best Way Trucking Inc. That enables GSC to expand its business beyond the port of Oakland to the Seattle-Tacoma region.

GSC now brings in Rob once a month to help keep its three-year plan on track. “Rob has a good business mind. It doesn’t matter what business you are in –- he figures out what he needs to know very quickly. He does a great job of bringing teams together,” says Scott. “Some of it is his personality: He’s non-threatening. He’s there to help you, not to criticize. He helps you be creative and look at things in different ways. I’ve been doing this so long that I get stuck in my ways. He’s able to help you think outside the box.”

Scott says GSC’s three-year plan has clarified the path to growth — $80 million is the target for 2014 (double 2011’s revenue) –- and therefore made it more achievable. “I can see how we easily transition from Phase 1 to Phase 2,” he says. “I’m not sure what Phase 3 will be yet, but I’m sure that as 2012 starts to unfold we’ll get a better picture of the operational and sales changes we need to make.”

Client HdL Companies

Clients of HdL Companies may have noted an extra spring in the firm’s step recently, as it seems to have been expanding its offices, services and staffing at a steady clip. A West Coast professional group helping local governments maximize revenues through compliance audits, analytical services and software products, HdL has in the past few years established a new HQ in Brea, California, expanded operations to Texas, added cannabis consulting to help local governments manage legalization, and continued to make significant new acquisitions.

Amid this impressive growth, many acquainted with the company may not realize that it has also been heavily engaged in the process of managing an ownership transition – migrating from visionary founders to the next generation of leadership under a new albeit home-grown CEO and senior team.

If handled badly, ownership transition in an early midsized firm can throw up a major set of hurdles and risks. Even if bold choices and a solid new leadership team are selected, challenges will have to be faced, and HdL’s own journey has not been without its hiccups and strains. But it is ultimately the combination of leadership, strategy and teamwork that can set the path for a next phase of growth. Getting this mix right is what has positioned HdL so well for its continuing success.

Embracing Transition. Founded in 1983 by Robert Hinderliter, and joined by co-owner Lloyd de Llamas in 1987, HdL, now has 96 employees in five offices in California and Texas (with three new states coming online soon). Early on, the founders recognized the major ownership challenge facing U.S. businesses, as according to some estimates up to 70% of the owners of small and midsized firms will retire within the next 20 years. This means that the ownership and control of some $10 trillion in assets will change hands, yet the majority of firms do not have ownership transition plans in place.

Hinderliter and de Llamas understood that a planned exit pathway was the best strategy to provide a positive retirement for them while also protecting the current employees and ensuring a platform for the future growth of the company they put so much effort into creating. Rather than selling to an outside concern, they opted for an Employee Stock Ownership Plan (ESOP). They mapped out a timeline for transitioning ownership to the employees, while identifying and mentoring a new leadership team combining inside and external talent.

It was a daunting task, with a number of key requirements. They had to find a next generation of leaders and owners in which they could have confidence. They had to win the buy-in of this new group to believe that they could really invest their lives into the business, including finding a way to fund the buyout. And the founders understood that, at the right time, they truly had to hand over the reins of leadership and allow the new team to get on with it.

As the example of HdL shows, a handover can be broken down into three main phases, each critical and with its own risks:

1. Mapping the Transition. A successful transition involves building a culture of ownership among the new leaders, and fully delegating all the tasks and responsibilities that owning a business entails.
2. Selecting the Leadership. The next CEO should be selected based on their true potential to be a great leader for the company. Many founders, failing to make hard a choice, opt for the emotional favorite, even if he or she does not have the full skill set.
3. Consolidating the New Team. The ideal leader will naturally develop followers and should make excellent decisions. But this is also the chance to update the management structure and draw in fresh expertise as well as outside advice and support to establish a fresh culture.

Making Succession Work. So, how did HdL’s leadership handle their transition? While managing the corporate changes, the company continued to expand impressively, moving to new headquarters to accommodate growth, adding its first out-of-state expansion into Texas with the purchase of Houston-based Sales Tax Assurance, and incorporating fresh services, including the new field of cannabis consulting. By the end of 2017, a decade since starting the transition, HdL had tripled its top line.

The key to this growth has been a series of excellent strategic decisions.

The first good choice was the new leadership. In 2010, the owners appointed Andrew Nickerson as President and CEO. Nickerson had joined the company in 1992 and had held a succession of roles with increasing responsibility, rising to vice president.

“When I was appointed with a new management team, employees already owned 33 percent of the firm, so the transition was unmistakably under way,” Nickerson remembers. “The completion of the ESOP buyout from the founders within two years made it clear that the future was ours to create, and it was very exciting.”

By mid-2013, Nickerson’s stewardship at HdL had borne fruit. Three long-time leaders had solidified around his leadership. The company had already paid off its note for buying one-third of the shares. And revenues were up.

The second important decision was to develop new business. With the approval of the founders, Nickerson and his team undertook growing the company to the next level. That made some of the older ESOP participants nervous that their ownership might be put at risk.

As CFO Jeff Schmehr, who joined HdL in 2005, recalls, “When we became a 100% ESOP, our near-retirement-aged employees lobbied hard for an ultra-conservative growth strategy. We wanted to minimize the risks, but we knew our employees were better served by supporting both the core business and developing new growth areas. Now I receive phone calls from these retirees congratulating our team on a job well done.”

The third key departure was to expand the senior management. With strong opportunities beckoning, the company required more leadership bandwidth. So, in 2013-15, Nickerson hired five more senior management leaders. The Board developed too, with three new outside members joining in 2016-18.

Consolidating the Change. It was not all smooth sailing, however. The company was correct in recognizing the need to change. But each new initiative brought fresh requirements, and all this change brought sharp challenges and “pain points” – strains in the system represented by inefficiencies, lack of clarity, skills gaps and risk. Moving from the founders to a new and expanded leadership team, opening new offices and taking on new product lines highlighted the need for a more disciplined management practice. The team recognized that this was vital to keeping the transition on track.

A fourth key decision, then, was to focus on management consolidation and growth planning. This was not just a general idea but rather an active choice to invest meaningful time, energy and resources into the effort, including bringing in outside help.

In spring 2016, Nickerson and Schmehr reached out to Robert Sher of CEO to CEO, the expert San Francisco-based consulting group specifically oriented to midsized firms such as HdL. This immediately gave them access to a wealth of top executive expertise. While the HdL leadership team had their hands full running the company, Sher and his colleagues were able to focus exclusively on the needs of the HdL senior management and on practical steps to ensure that agreed improvements actually took place.

At a delicate moment in the transition, the leadership especially appreciated the objectivity of the advice Sher was able to provide.

“Within the company, there was a progressive, change side, and there was a kind of status quo side. We realized that a new director would become the deciding factor,” recalls Schmehr. Nickerson and Schmehr attended a seminar hosted by Sher, and they liked what they saw. “So, the next thing we know,” Schmehr continues, “we are turning to CEO to CEO in several areas, helping us through the changes, and especially helping Andy [Nickerson] find creative ways to deal with the issue of balance on the Board.”

One of the first innovations was to develop a One Page Business Plan, bringing clarity and accountability to key corporate objectives. The leadership committed to meet monthly to review progress and encourage bonding within the group. Communication and teamwork increased immediately, deepened by a two-day workshop on team cohesion.

“As part of that trust building, we were encouraged to share something personal about ourselves,” says Schmehr. “I think even Rob [Sher] was amazed at the kind of personal information that came out during those moments. It showed everyone that there was in fact a high-level inherent trust within the room.”

This bonding effort was combined with ongoing business coaching, for Nickerson and other key members of the leadership, provided by Sher and Megan Patton, another CEO to CEO principal. Being a CEO can be lonely, and this process helped Nickerson think through the challenges and come up with fresh solutions.

“We were well into the transition by then, and were all feeling a lot of pressure to perform,” says Nickerson. “But some of the things we were facing where out of our wheelhouse. Rob [Sher] was able to draw on a huge breadth of corporate experience to help us find fresh ideas and new solutions. It was absolutely crucial.”

These discussions helped the team acknowledge that the new areas of business demanded new expertise they did not have in-house. While the out-of-state acquisition in Texas, HdL’s first, needed to be bedded down, the team was impatient to acquire more. Glenn Fishler, another CEO to CEO principal, coached the team through a planning process, so that all further acquisitions would be strategic and well planned.

The CEO to CEO team also provided advice on the particular challenges of a start-up venture, which was effectively the case with the new cannabis consultancy. HdL proved to be expert at the work itself. But unlike in the sales tax auditing field, where the firm is a recognized leader, they did not appreciate the essential need for aggressive marketing when moving into a new area.

“We had this nice dinner table all ready and set for California’s local governments, but the word wasn’t getting out to everyone,” says CFO Schmehr. “Basically, we were sitting back and taking clients as they came, and Rob [Sher] said, ‘Yeah, you’re not going to grab market leadership that way. You’ve got to get out there.’ He was instrumental in making sure that marketing for the new area was not under-resourced or under-appreciated, otherwise we would have missed the window of opportunity.”

The consolidation process also focused on Board transition, as it needed to move from an internal and founder-controlled body to a more professionalized strategic entity. This dialogue led to a successful mapping out of the additional skills required, recruitment of three new members, and training on new roles and responsibilities, so that the Board could work collaboratively with management.

Tying all these efforts together, the HdL leadership launched a process to develop a new long-term vision. To kick off the exercise, the CEO to CEO team organized another two-day offsite workshop to share approaches on how to develop, consolidate and drive a fresh vision. Once approved by the Board, the resulting strategy will guide the company’s future over the coming decade and ensure that the workforce at all levels is pulling together.

Be Strategic about Succession. Ownership succession planning requires a strategic approach that starts several years before the transition moment. Founders must be thoughtful and realistic. Then they must move steadily to transition the business for a new future. The new owners also have to be strategic, mapping out their plans while recognizing and taking steps to fill their weaknesses and gaps – whether through additional senior managers, fresh Board members or expert external support like CEO to CEO.

As Nickerson says, “From a macro-perspective, taking 10 years to change our company into a team-led growth machine seems slow. On the other hand, it felt like each year at some level our culture and leadership changed. We took it slowly, one step at a time, even though we were eager to arrive where we are today. In the end, we have preserved the best of what our founders, Robert and Lloyd, created along with new energy and high expectations.”

A $60 million revenue manufacturing firm found itself without a founder and CEO when he passed away suddenly. There had been a #2 executive who had been discussed as a successor, but the founder had made no official choice. The business was owned by six people, many whom were working in the business for years. They were all on the board, but it had always operated informally, turning to the founder (and controlling shareholder) to make decisions.

CEO to CEO was retained to facilitate the crucial board meeting where the new leader was to be chosen (or a search would be commenced), and where several other key decisions had to be made relative to the passing of the founder. Hundreds of employees nervously awaited news about who would lead the firm: an outsider to be recruited, or an insider, and if so, who?

Before the meeting, we interviewed many stakeholders and assessed the internal and external risks to the firm stemming from the leadership change. Both before and during the meeting, we helped the board understand what tasks and roles the founder and the #2 executive had undertaken in the past, and how that work would need to be done in the future. We educated the board members on how the board must now operate differently (and more formally) in the absence of the founder. We emphasized that without a “strongman” founder to make decisions and to settle disagreements, the tone and actions of each board member were now far more important (and consequential) than ever before, and that this was a juncture where the board would either become more cohesive and effective, or divisive and toxic.

The full day session went exceedingly well. The #2 executive was elected to be CEO. The debate on this issue and others was both passionate and constructive. The board further decided several other organizational changes that were implemented in the weeks following.

A CEO realized in early November that her planning effort needed a jumpstart in order to be finished before the New Year. While she was the controlling owner and founder, she had several others involved who were owners and considered partners. They had become restless, talking about new strategies loosely, but no one had the time (it was a busy, high growth year) to really discuss them and make decisions. She knew that if she didn’t make the time to have these important discussions, they might make rash, uninformed strategic decisions. There was the short term planning for 2016 that needed to be nailed down as well. To pull all of this together, she set up a two day planning retreat and asked CEO to CEO to lead it.

We met with the CEO several times before the offsite. She was good at listening and staying open, understanding key business issues and personality considerations and laid out the agenda. We decided to focus on strategic discussions the first day (to relieve the pent up desire to talk about these), and operational planning for 2016 the following day. It was too much to squeeze into two days, but we had no other choice since the team was sprinting toward a strong year-end and was buried in the day-to-day.

The team was very engaged. Active facilitation was required on the first day to keep the discussions at a high (strategic) level. Since no research had been done before the offsite, final decisions were not made, but tasks and projects were assigned to those strategic ideas with the greatest merit. It was agreed that any new strategies decided upon would be kicked off in Q2 or Q3, giving time to properly plan. Key actions were assigned to a specific owner, with deadlines. The second day was focused on the upcoming year, including an agreement on priorities and a high-level discussion around resources. Specific meetings were put on the calendar for follow up discussions, and a deadline was set for a final operational plan to be executed.

Offsite for New CEO Jumpstarts Planning Process
After ten years, a successful partner in a professional services firm was promoted to the CEO’s seat when his long-running predecessor moved toward retirement. The new leader turned to CEO to CEO to lead an offsite for visioning – the hoped-for future vision of the firm growing and expanding.

The predecessor had been a directive leader, setting the direction for the organization, including making all decisions. Because of this, the new leader found that many of the senior partners were not acting as proactive leaders when it came to business challenges (finance, recruiting, productivity, etc.). And many of the functional leaders were brand new. In the preparation for the offsite, we heard his observations of the weakness in the leadership team. Some pressing challenges (and our advice) shifted the focus of the offsite to helping the leadership team be more proactive by clarifying what had to be done and who would drive those activities.

The offsite was empowering for the entire leadership team. Each came away with a draft one-page business plan, the core of what forms a Business Leadership Operating System (BLOS). We built and kicked off the BLOS, working with the team of 12 to hone those plans, coordinating approval of those plans from the CEO and training the team in this methodology. We supplied a cloud-based portal where the plans resided, and where each plan owner would maintain monthly scorecards and progress reports. We facilitated monthly plan review meetings for six months to coach and ensure the operating system was running well. We coached the CEO (meeting twice monthly).

Within a month after the plan set was completed, the CEO observed that leaders were “making things happen” without relying on or waiting for a “nudge” from the CEO. He was delighted. The call to action for more business development, peppered throughout the plans, moved the firm from needing more work to having an abundance of work. In the past, the CEO had to request data from the CFO to give to his team, which was time consuming for him. With the BLOS in place, the operating system connected all the leaders directly to the CFO for some of their dashboard data, a big relief.

Most leaders have stepped up their performance and are clearer on the results they must deliver. However, some are not capable (or don’t have the time) to attend to all the priorities, and the firm is hiring to fill in crucial gaps.

After seven years of running the business, the CEO was concerned that the leadership team had lost the connection with their mission—their “why” for running the business. We were retained to lead an offsite where the extended leadership team would come together and redefine their “why” and their corporate values.

We began by working with the CEO/founder to understand her “why.” She had gone through some personal changes, and was wondering if she was “burnt out.” With a few private sessions, she found the core of her passion for the business, but we didn’t want to impose that on the team. We constructed a ground-up approach to genuinely extract the team’s feelings in a half-day session.

At the start, we solicited commentary through open-ended questions. We had learned in advance who might be inclined to dominate the conversation, and we encouraged other people to share. Using values cards and a lot of post-it notes, we collected values and led a discussion to find those closest matching most of the group. With that short list in hand, we launched into a development of a “why” statement (a mission) that the group loved. With 15 minutes left to spare, we settled on an excellent, well received statement that epitomized their “why.”