Six years ago, Daryl Flood stepped off a cruise liner and dashed to the nearest payphone in Miami. While vacationing, he had read The Great Game of Business, written by Jack Stack, the CEO of Springfield, Ill.-based SRC Corporation. Intrigued, Flood called the author, Jack Stack and asked for more information.
“I can do better than that,” Stack said. “Why don’t you spend a couple of days up here, and I’ll show you everything that goes on.” Some months later, Flood met with Stack and toured the company. The Great Game of Business was exactly the management strategy Flood was searching for to move his 14 year-old business, Daryl Flood Warehouse & Movers, Inc., to “the next level.”
“I knew I couldn’t personally sell every job, pack it, load it, get the papers, collect the bills, and try to manage the company by myself,” Flood says. “I needed to know how to teach the people to have the same sense of ownership and urgency.”
Put simply, the premise of The Great Game of Business is that the best, most efficient, and most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the financial outcome, good or bad. It’s worked for Daryl Flood, although it was hardly an overnight success. Still, in a few short years, the company business has achieved the “next level” and more, growing from 14 to 84 leased owner-operators and from $8 million to $47 million in revenue, becoming the second largest agent of Allied Van Lines with offices and warehouses in three markets – Dallas, Houston and Chicago.
Playing the Game
The management principles promoted by Stack’s book fall into three areas, each of which is a process, not an action. To succeed at the “game of business,” Flood says all employees, from the janitor to the CEO, must know the rules of the game, how to keep score and “what’s in it for me.”
Rules of the Game. One of the initial challenges of implementing Stack’s management style was getting everybody to understand the reason for being in business – to make money and generate cash, says Jeff Talbot, general manager and vice president of operations. When asked the reason they are in business, many employees will instinctively say, “to serve the customer.”
Daryl Flood Warehouse & Movers, Inc. conducts a two-day orientation for all new hires. The company also has continuing education courses, called “Daryl Flood University,” to teach such things as job-specific skills, customer service and financial training. The managers teach employees, regardless of their job description, how to read financial statements and what the measurements mean to the company’s bottom line and stability. Steven Weatherford, vice president of finance and human resources, directs the curriculum.
“Two things that all successful companies have in common are technology and training,” Weatherford says. “We make everyone listen. We like them to understand if the company is financially stable, and we teach it in a way that helps them understand their personal finances as well.”
Keeping score. In addition to tracking the financial results, part of keeping score includes setting goals and developing a business plan for each unit in the company. The company’s overall business plan is formed by input from all employees – even laborers – as to how many units they can pack per hour.
“Employees help put the business plan together,” Talbot says. “It goes from the employees up, not the managers down.” Each Tuesday, the company has a “huddle” meeting where company executives and department managers forecast and report key financial and operating statistics and review how the company is measuring up to its goals. The Houston and Chicago offices join in through teleconference.
“(The reports) are a snapshot of what’s going on,” Weatherford says. The reports used in Tuesday’s meeting are then distributed to every employee throughout the company. Department managers go over the reports in department meetings.
Another way employees learn how to “keep score” is by being assigned an expense to audit by their department manager, such as the phone bill or office supplies.
“They learn what all the numbers mean, and have even gone out for bid on them,” Weatherford says. “It gives them an interest level and helps get it done. Plus, they feel pretty good about themselves.”
Performance incentive. When changing to the new management style – and culture – the company was already experienced at drawing up business plans and reporting financial information. It had never had a successful bonus plan, however. Flood brought in a consulting company to help design a performance incentive. Besides getting an incentive plan, Flood also hired a new vice president, Steve Weatherford, who left the consulting business shortly after.
The company has a “gain sharing” plan for employees and a bonus plan for department managers and executives. Employees that participate in gain sharing help set the goals for the department and, in turn, for the entire company. Upper management sets a percentage in the company’s annual business plan and any profit margin that exceeds that goal is split evenly each quarter. The managers earn an annual bonus, based on their salary, if the employees get a gain share.
During its most profitable year in 1999, the Daryl Flood Warehouse & Movers, Inc. paid $600,000 in bonus money to employees. The company consistently exceeds the industry’s average profit margin of 1 to 2 percent, Talbot says.
Daryl Flood, president of Daryl Flood Warehouse & Movers, Inc., teaches The Great Game of Business to instill a sense of ownership and urgency in all his employees.
At the same time Flood was starting to implement the principles of The Great Game of Business he brought in Jeff Talbot as general manager and vice president of operations. The operations department had been struggling to keep pace with the company’s marketing and sales efforts, Talbot says. He immediately began making changes – including hiring and firing employees.
“It was miserable that first year,” Talbot says. “The culture changed and the management changed.” A feeling of distrust was growing, he says, especially among the independent drivers, who were suspicious of how the company was growing and changing so rapidly.
“People were saying I was cutting deals to get them here,” Talbot says. Eight months after Talbot joined the company, he organized a conference for all the independent contractors – and their spouses – to put an end to the rumors and improve the teamwork among its contractors.
The first conference, which took place in a hotel, was an instant success. “The first conference was a turning point for the company,” Talbot says. “We got press coverage and we got the drivers talking to other drivers. It worked great.” In subsequent years, the company has staged two conferences on Caribbean cruises.
Items on the conference agenda include introductions of new contractors, and discussion of the company’s finances and customer service standards. Talbot also brings in tax and small business consultants to help the owner-operators. To spread the cost of these conferences – and to benefit its contractors – Talbot also brings in sponsors, such as insurance agents and a local truck dealership.
The company shares success stories and shows the other owner-operators in the company the top earners, without any names being attached. Last year, the top earner was $423,000, and the average earner was $185,000 in gross revenue.
“A good driver can keep about half of that after expenses,” Talbot says. In addition, executives hold an awards ceremony for driver leaders in quality, revenue and safety. The conferences and the earnings potential are tough to beat. Turnover is about 10 percent with 87 drivers on a waiting list, he says.
Daryl Flood Warehouse & Movers, Inc.
Location: Coppell, Texas
Principal: Daryl Flood
Equipment: 85 total trucks – 65 owner-operators and 20 company-owned Kenworth, Mack and Isuzu; 110 Kentucky trailers, 95 company-owned; 15 Ford Cargo Vans.
Warehouse Space: Dallas, 125,000; Houston, 100,000; Chicago, 50,000 square feet.
Freight: Moving household and office goods, and warehouse storage.
Challenge: Getting all employees, including the rank-and-file, to understand the business and work with the same sense of urgency and responsibility as the owner.
Solution: Using open-book management system where employees participate in developing the business plan and sharing in the profits; continuing education within the company about finances, customer service and teamwork.
Working as an agent
Through its affiliation with Allied Van Lines – a “clearinghouse” for contracts, logistical moves, accounting and many other information services – Daryl Flood Warehouse & Movers, Inc., moves customers to and from any worldwide destination. Other Allied agents handle moves that the company cannot do with its own equipment or employees.
Although under agreement to not compete with other agents in price, the company gets its edge with service – even at the expense of efficiency at times.
“We’re a market-driven company,” Flood says. “The reason we win is because most movers are operations oriented. We deliver what the customer wants, even if that is not the most efficient way of doing business for us.”
Eighty-five to 90 percent of Daryl Flood Warehouse & Movers, Inc.’s customers are corporate clients. The events of Sept. 11 and the economic uncertainty that followed – and still continues – has had a crippling effect on the moving and storage industry as businesses cut back on hiring and moving people. The company has scaled back to 65 independent contractors and cut some positions.
“We’re still trying to figure out where the right level of adjustment is,” Flood says. “It’s been a very soft first quarter. Overall, the industry is down 22 to 23 percent. I think the third and fourth quarters will have steady improvement, but it will be a tough year. I’m not sure that we will see business levels return to 1999 levels anytime soon.”
Despite the downturn, the company remains financially sound and, through its open-book management system borrowed from The Great Game of Business, the employees know it. Management is confident the company is still headed in the right direction – and that more customers will realize that too.
“The ones who ‘get it’ buy from us,” Talbot says.