17. Driving Culture & Performance with Ron Alvesteffer

In 2002, Ron Alvesteffer became President of Service Express overnight. During his tenure as President, Ron has taken the company from a local service provider maintaining server rooms, with $10MM in revenue, to an international player with $200MM in revenue.

According to Ron, the keys to a performance driven culture are trust, communication, and curiosity. In this episode, Alvesteffer shares how he and his team apply these principles to the business and how they’ve had consistent double-digit growth as a result. Ron opens up about how he uses data to align company and employee goals, as well as how he gains air cover from the company’s founder and investors.

Transcript

David Morris  00:10

Welcome to season two of the HiPER Leadership Podcast. I'm your host, David Morris, CEO and founder of HiPER Solutions. At HiPER Solutions, our mission is to bring positive change to the world. Leaders today are faced with unprecedented change, and yet even the best leaders have had to toss out their standard playbook and think outside the box. Our intent with the HiPER Leadership Podcast is to share best practices, so that you, our listeners, can gain some actionable and practical approaches to your next big-bet endeavor. Joining us in today's episode, we have Ron Alvesteffer, president and CEO of Service Express. Founded in 1983, Service Express is a third-party maintenance provider that supplies system solutions, support, and other various technology services to companies around the world. Hi, Ron. 

Ron Alvesteffer  01:08

Hey David, how are you? 

David Morris  01:10

I'm good. We met not too long ago from a friend and previous guests, McKeel Hagerty.

Ron Alvesteffer  01:15

Yeah. Great, great guy.

David Morris  01:17

Terrific. Well, as we were talking a little bit about your story of growth, what really struck me most was this company that had been around since ‘93. And now fast forward to July 15, 2002. The company has $10 million in revenues. And tell me about the conversation that you had with the founder that day.

Ron Alvesteffer  01:39

Well, July 15, was actually the culmination of the conversation I'd had with him in late March around the future of the company and the structure. And basically, around the fact that I thought it was time that he named me president and let me run the company, and [he], as the founder left and played the role of investor going forward. And I remember that because it was right before I went on spring break with my wife and my young son. So, it was late March when him and I had that conversation, which was not scripted or planned necessarily that day, by the way, which makes it kind of more interesting.

David Morris  02:14

Yeah. So here you were a few months before that, and talked about, you know, assuming this president role, then you do a check in on July 15. What was the biggest shocker?

Ron Alvesteffer  02:24

Well, July 15, was the day we announced it to the company. So, we had made the decision that he would name me president, it was going to go into effect October 1, so we gave people got 90 days to transition and me 90 days to transition. And so, we walked into the all-company meeting that day, and he announced to everybody our plan. And then what the shocker was that what he said next was, “What I'm going to do and what Ron doesn't even know yet is that this goes into effect today. I'm going back and I'm packing up my office, I'm leaving the day-to-day operations of the company, if you need anything, go see Ron.” And our plan, just before [we] walked in that meeting, was October 1, and then he did that. And everybody turned and looked at me, and here I'm wearing, it was the middle of summer, so I’m wearing shorts [that] were pretty casual and a polo shirt, and everybody turned to look at me and I was like, ‘Okay, here we go.’ But I was ready for it. We, you know, we'll get into the story, I was already kind of assuming that role. So, it's just typical. Mike, the founder, which was like, if we’re gonna do it, let's just do it and get going on it. And so just another really great move by him at the time.

David Morris  03:29

One of the things that intrigues me is so many founders struggle with bringing in that type of leader that can take it to the next level. And frankly speaking, do it in a profitable, growth manner. So, if we think about a business that went from $10 to $65 million before you brought in growth capital, what happened? What were some of the things you had to put in place over that next year? You don't bring in any outside capital, one of the founders becomes effectively an investor, you're now running it. What are the things that someone like you in that role do to get things rolling?

Ron Alvesteffer  04:05

Yeah, well, I think at the time, we were already growing and on a good roll. Mike had brought me in in 1997, as a sales manager. I was the first manager he ever hired for the company. I was like the 15th employee, we had four locations, and we are less than $2.8 million revenue at the end of ‘97. So, I had already brought in sales development, sales training, sales strategy, into the company that we were executing on and beginning to execute on our geographic expansion plan, which was opening two offices a year, as we spread through the Midwest to the Southeast, and then eventually to the East and West Coast. So, we were rolling on that part of the strategy then. I think the key things in 2002 where we were at which led to this change, and where we're going forward was that I was leading sales. There was another senior leader who was leading service and then our controller, who was leading the finance team and in operations, and we all got along great, and we communicated. We were also operating as sort of independent silos. Not really as one unit; the best that we could at the time. And that was the conversation I had with Mike was that I felt that we needed a voice and one strategy that aligned all the departments and all the people in the company in one direction and communicated what that was, put in KPIs to measure progress and performance, and to make the adjustments going forward. So that was really the key thing that we did, [was] I brought in, I promoted somebody to take over the sales lead for me, took our service leader and our controller, and that became my executive team. And that's what we've really started forming as one unit, one strategy that would then execute through our different departments for that. So that was, number one, just creating that alignment within the company and that clear communication strategy. 

David Morris  05:58

How long did that take? 

Ron Alvesteffer  06:00

You know, I think it was fairly quickly, as I got kind of a running start into taking over the position. So, I was already really assuming this leadership role prior to the announcement of me getting the actual title. So, we had a little bit of a running start. But I would say by the end of that year, we were really firing on all cylinders. And the other thing that we did that was really key to unite us all was we came up with our core value at the time, which was we decided people were going to be our key differentiator and we're going to be the reason behind all the success. [We decided] that we are going to create an environment where we can attract the best talent, where they could come and do their best work, and be recognized rewarded for it. And really what we came up with, our core value, which reads: cultivating a culture of growth, because we've always been a growth-oriented company, that empowers our people to achieve their personal, professional, and financial goals. So, it's really based on Zig Ziglar quote, which is really my life quote, that is “You can have everything you want in life, if you'll just help enough other people get what they want.” And so, we said, that's what we're gonna do. That's how we're going to win is we're gonna surround ourselves with like-minded people who want to work together as a team, take great care of the customers be part of a growing company, well figure out what they want to achieve, so we have a goal setting program that is here to this day that we call vision goals, where they share with their leaders, what are their personal, professional, and financial goals that they'd like to achieve while at Service Express our theory is, if we can get the right people, figure out what they want to achieve, and create an opportunity to help them achieve those goals here, this will drive the company growth and our in our company goals will really be blown out of the water, led by our people-first initiative. So, we came up with that, shortly after I was named president, we just sat down as a team and talked about we all share this philosophy, and we didn't hire a marketing team or anything else, we just blurted it out: help our people achieve personal professional financial goals, let's do that, [from] there we communicate[d] to everybody and we set off on that strategy.

David Morris  07:49

And what's an example of the types of goals that you find some of your highest-achieving team members have chosen over the years?

Ron Alvesteffer  07:58

Yeah, you know, it's interesting, it's like professional goals are probably the easiest for them. By the way, this all sounds great; people are drawn to our company. And this is still our core value today, we still do all of this. It's our number one strategy that we use. People are drawn to it until the first time you sit down with them and ask them what their goals are. And then they are like, “Oh, this is uncomfortable. And I got to tell my leader to kind of get vulnerable and open up. Professional goals are probably the easiest for them. “What are you trying to achieve here at the company?” “Do you want to stay in the same role and keep evolving as we grow, as that role grows?” (Which is great, we love that.) “Do you want to advance into leadership?” As we've grown now and gotten a larger size, there's just so many different paths that an employee can go down. So, we really want to hear from them, what interests them, and where's their career path want to go? So, we talk about that. And so, when they share them with us, we can start talking about creating experiences, opportunities, training, whatever it is to help them get prepared to be in a role like that. The other ones financial, this is the one that's always had a big impact, but caused probably the most anxiety over the years, which is my leader, saying, “[Do] I gotta ask them how much money they want to make, like next year, and two years after that, and three years after that?” Here's the number one question I've gotten over the years: “What if they tell me a number that's too big? What if they say they want to make an amount that we can't pay?” And my answer is always, “Well, why can't we pay it? I mean, if they provide that value to the company, we should be able to pay them.” So, the key question is, “What was the value they would need to bring to the company in that role, or a different role, that would make them worth that amount of money?” “If I was going to hire that position off the street, what I would have to pay [them]?” And that really changes the whole tenor of that conversation from me being the, I call it the ‘Compensation Genie’ where I just sit back and say, “You get a raise, you get a raise, you get this much, you get that much.”-That's really not, in my opinion, how you want to do it. It's about tying the value they bring to the growth of the organization and providing them fair value for that impact that they're having. And that really changes the dynamic of that whole conversation makes it really powerful work. Together, we map out what that is.

David Morris  10:03

Powerful. So, it sounds like it's getting that chair a compelling vision, made some promotions, got that core team solidified, goal structuring for the organization, the culture piece. Again, what fascinates me so much is for a founder to have a type of right-hand person like you, who can take something from $10 to $65 million with no outside capital, but just empower you to be able to put these structures and culture in place. I mean, what else happened over these next few years? I mean, what did it really take to, beyond just having some tailwinds, to really get to the $65 [million].

Ron Alvesteffer  10:46

Yeah, I think it was actually staying very disciplined to what we call our four core objectives, which are: [1] excellent customer service. So, we're trying to be the best service company in the world. That's our goal. [2] Employee Engagement, we want to be the best company to work for in the world. That's our goal. [3] Revenue growth, we want to grow double-digit organic growth every year. So, we want to invest in those areas that are going to provide that double-digit revenue growth. And then [3] margin retention and growth, which is, we want to be in high-margin business for us in and around the data center. And we want to make sure that we are being smart with our investments that we're returning that certain amount to the investors because that's why they have their capital in, whether it was the founders or whether it's our institutional investors now, but then take what's left over from that and invest back in the company to continue to fund it. So, there's four things we're trying to do every day, best service company in the world, the best company to work for in the world, double-digit organic revenue growth, and margin growth as we go forward. And really, we're just staying disciplined around our core value that I talked about and our KPIs to achieve those goals. And that can sound like, ‘Okay, well, that's kind of basic and normal.’ But I would argue it's not. Jim Collins says it in Good to Great and Built to Last and more companies die from opportunity consumption than opportunity starvation, which means they try to do too much. [They] try to be everything to everybody. And I think one of our greatest strengths over the years has been staying very disciplined, right, I just heard this quote too, that resonated with me: ‘Narrow the focus, increase the opportunity’. And people get that messed up so many times, in my opinion. 

David Morris  12:23

And so today, you would say the business's core focus is what? The core customer is what?

Ron Alvesteffer  12:30

Our core customer continues to be a company with a data center, we sell service contracts to fix servers, storage and networking gear inside corporate data centers. So, it really hasn't changed that much. We're just now nationwide, we're now over in the UK to expand out through Europe. And we continue to really track along the same tenants. Mike would say, when I talk with him, and we're still really good friends and stay connected, he's like, “There really hasn't been that much change over the past 20 years. We just do it now at a bigger and broader scale with larger, enterprise-size clients.”

David Morris  13:04

Building on that, and you know, particularly those first few years when you went into this role, Ron, what were some of the key things in that relationship with Mike, how frequently would you touch base? And how did you manage up effectively to him as an investor now?

Ron Alvesteffer  13:20

Sure, yeah. I think to think about what it was like going forward in 2002, we need to almost go back to and remember that I was Mike and I worked together for five years, yeah, hired in August of ‘97. And this promotion was July of 2002. So, we went through five years together with Mike being the founder and president of the of the company, and me reporting directly to him as I was in charge of all sales strategies and execution. And so, we'd been through a lot together, we'd been through, when it came out, immediate growth. We stumbled around the year 2000 because of y2k. That was something that impacted our business because so many servers that we had under contract got upgraded, because they weren't y2k compliant. So, we had a lot of what they called ‘churn’ on our contracts, a lot of revenue that went away. And we still grew 9%, but we didn't have our double-digit growth that year. And so, we went through that, we figured that out. I went through some just personal growth as a leader, going from a young, intense leader, where I was probably too intense and was not creating a great culture for a couple years there and had higher turnover rate, and performance suffered. We went through all that together and then came out of y2k, came out of that moment when I wasn't acting like the leader [that] I needed to be and that I hope that I am today. But we went through all that and then we just really took off after y2k. We're growing 20% every year going through that. So, it's important to remember that Mike and I had really developed a bond and a sense of trust that I knew he was gonna stand by me even in times of struggle, and he knew that I was gonna stand by him and I was not going to go anywhere, even in times of struggle that we would figure it out together, and I trusted him completely. And he trusted me completely. And it really was, I think, that type of relationship and bond that made him feel comfortable to say, “I can leave this company because I trust Ron to run it.” And then also trust me to escalate any issues, and communicate with him any areas of concern, while he wasn't here day to day. So, I think that's an important part for people to understand, he didn't just hire me and I came in and took over. That's not how it worked; it took longer than that. 

David Morris  15:35 

And if you think about the job description of an investor, somebody like in Mike’s role, then 20/20 hindsight, what would you sort of say the three most important things that he needed to do for you to be most effective? What are the three things you counted on most from him?

Ron Alvesteffer  15:53

I think the things I counted on [from] Mike was just perspective, he had the perspective, he really mentored me in the business in those first five years and going forward. And so, he just has a really good business mind, and just great instincts. And so, I would bounce ideas off of him. And I would just love to get his perspective. And I didn't always agree with it. And I didn't always put his ideas into plan verbatim, but I would listen, and then I would usually take that idea. And he would say, he said this to me one time, he said, “You take the ideas, and then you kind of shape it, you think about them, shape and form them to how it works best. And then you implement it how you see best. And he trusted me to do that. I just really loved his outside perspective; it was really helpful. As I was president, he left the day to day because he wasn't involved. He wasn't involved in the day to day, so not being so close. And so right in front of it, and so close to all the people involved, he could step back and really have a more objective view. That was very valuable to me, as I ran the day to day of the business.

David Morris  16:49

Fascinating. And then what about you, I mean, if somebody is founder of a company, they've grown it to a certain state, and now they're going to promote someone into that CEO role, what really become a few of the most essential things that founder needs to be able to count on in this new person to be able to do?

Ron Alvesteffer  17:08

It's a great question. I think, first and foremost, you gotta have that trust, right? And I think, again, Mike and I developed that over five years, where we trusted each other completely, very few people I would ever trust more than Mike in my life. And so, and I think he feels the same way about me. And so, you got to have that trust, that they're gonna do the right thing, they're gonna communicate. Communication is another thing. They're gonna communicate what's going on. They're gonna figure out kind of that rhythm of, what does the founder need to know, and when does he need to know what. There's a balance between, they're not running the company, so they don’t need to know everything. But they need to know that if there's an issue or you're thinking something or something coming up that we need to talk about that you're going to raise that with them, they trust you that you're going to communicate with them. And you figure out that communication strategy of what is that rhythm, whether it's weekly, monthly, quarterly, whatever it is. And the last thing, I think, this is a key trait I look for in all leaders, especially senior leaders, which is that curiosity trait, which is trusting someone, there's one thing to take over the business and just run it as is the way it's been going. But does the person have the trait of curiosity, where they're always asking questions, they're always thinking: ‘What's next?’ ‘How can we do it better?’ ‘Is there a different way to do it?’ ‘What's coming down the road that could cause us trouble?’ ‘What's coming down the road that could be a great tailwind for us?’ Having that trait of curiosity, I think is so, so key for senior leaders in that position. Because otherwise, if someone's not being curious and looking at those things, you're going to run into a wall at some point, you're going to be blindsided. And that will create an issue. So, curiosity, trustworthiness and communication, I think are the three key traits they have to be developed.

David Morris  18:48

You know, if we fast forward now to 2015, was that when the first institutional money came in? 

Ron Alvesteffer  18:52

It is.

David Morris  18:53

Okay. So, we're now at $65 million in revenues, you raise how much?

Ron Alvesteffer  18:59

Well, we ran a process and partnered with a private equity group, they came in and bought the majority of the company.

David Morris  19:05

Okay. And then from then till today, 2021, revenues have grown to what?

Ron Alvesteffer  19:10

We'll finish 2021 north of $200 million in revenue.

David Morris  19:14

So, you go from $65 (million) to $200 (million) plus. What portion of the growth was organic?

Ron Alvesteffer  19:19

I'm trying to think on the pure revenue numbers. But I think, you know, I'll say roughly 75% is organic growth.

David Morris  19:27

That's really tremendous. And the reason I'm curious about this is, now you had a new type of air cover. Now you had outside investors, board members, etc. I’m wondering what additional things you developed just in terms of how you were going to manage up and bring those investors along beyond what you had done with Mike.

Ron Alvesteffer  19:47

Yeah, it's really interesting because I think that working the setup that we did from 2002 to 2015, with Mike and his partner, playing the roles of investors and myself with my executive leadership team, running the country, we were really set up perfect for private equity. Because we were running it independently, we had a management team that was in charge that you weren't exiting, even though it was first-time, institutional capital, you weren't exiting an owner, the owner, in essence, had already been exited from the day to day. We're set up really well that way. And what we did with our first private equity, we're now on our second group that we partner with in 2019, but with our first one is really when we instituted the meeting rhythms of a monthly financial call with the board to look at the past month results and update on key initiatives. And then quarterly board meetings. We didn't have any of these before we got with private equity. So, we'd have our quarterly board meetings, which were really focused more on strategic initiatives and investments and tracking the progress of those investments. And that's such a good and healthy discipline. Looking back, I would have set up probably something more formal with Mike than what we had where we sort of did those things, but not in as a formal way. But I think that's really a great discipline to have, and to, again, listen to, I'll say outsider's perspective there on your board, not really outsiders, but they're not running the day to day, they're not operating in the business. So, they have a good perspective of kind of that 20,000-foot view. And they work with a lot of other companies. So, they've seen some things that work and don't work. And they were great for us because they never told us what to do. But they would offer perspectives and insights and thoughts for us to think about much like Mike, here's things to think about. And then they trusted us to think through it, and implement and execute the way that would be best for Service Express. 

David Morris  21:33

Was there anything across those next couple investor groups that stood out to you, feedback they gave you that they really liked in terms of how you did manage up to them, versus maybe even other organizations they've worked with in the past?

Ron Alvesteffer  21:45

We have a performance measurement system that we call SR5, and so it’s our name for the way we track performance from the company level, through the different departments and regions that we have, and the individual level, where we track performance, we have what we call ROIs, which stands for responsibilities, objectives, and indicators, which is essentially a measurable job description that everybody in the company has, including myself, and they're on our intranet, where everyone can see the results. And so, I think that's the key thing, having those metrics, understand what the strategy is, what the key initiatives are, and then tracking the progress on those, are we hitting those goals? Or what are the leading indicators that tell us we're on the right track, or we're not on the right track for those goals? That was really the key, as far as communication. We always loved data. My team and I always loved data. We love the movie Moneyball; when it first came out, that really resonated with us, because we're like, we collect a lot of data, we can start using this. Think about Moneyball, and how does this affect decisions we make in every department. And so, we've been collecting data for over 15 years. And now we have a data science team, that we really use that data to help us run the company, you know, that's a hot topic right now, and everybody wants to use it. But if you haven't been collecting that, then it takes a while, you got to start collecting it, you got to scrub it for accuracy. Otherwise, it can lead you in the in the wrong direction. So, I think those things that we did, really resonated very well with our partners.

David Morris  23:08

Because they're so data driven in the first place?

Ron Alvesteffer  23:10

Exactly right. And so, they love that we had data. And so, this is where we're really going to on a lot of our initiatives is you can almost turn them into a math problem. And it really helps because it keeps you out of those situations in the board meetings of here's my opinion, here's your opinion, who do we think is right, and we can argue all day about it. But if we back it up with, at least show us right, you don't make decisions strictly on it [data]. But let's look at it. What does it show? What are the trends? You know, are we on an uptick or a downtick? What's all the other factors? And where do we think we're gonna go and then you agree an initiative, you say, ‘Here's where we think and we project it's going to be’ right, I love projections. I'm also agreeing with the idea around projections and models that all models are wrong, but some are useful. Meaning you never get it exactly right. But you get directionally right. And then you track it, and you make adjustments. And if you do that on a consistent basis, if you're disciplined enough to do that consistent basis, it helps lead you down the right path and allows you to make the adjustments necessary to what your strategies are. 

David Morris  24:12

Very actionable. As we conclude, my remaining question is putting yourself in the shoes of a Chair of a Board, a Governor, President of the United States, and all of a sudden you need to recruit somebody to come in and go pull off a big growth effort or a game change, you know, like what Mike counted on with you, what would be a few of the key traits you would use in selecting that leader?

Ron Alvesteffer  24:36

We do two things, the first thing we do is assess the skill, right? Do they have the skills necessary to do the role that we're looking for? And that's actually the quickest and easiest part to assess. It's pretty straightforward whether to determine somebody has the skills or not. After that you start to determine what's inside the person and are they a right fit for our culture? And I think that's a big part of it is, we have a certain culture, a very strong culture. We're not for everybody, right? And if we're not for you, it doesn't mean we're good and you're bad, we're right and you're wrong or vice versa, it just means it's not the right fit. There's different ways to go about doing a lot of things, and we have to understand what the culture is and who we're bringing into it. And if we want to change it, be intentional about that. But if we don't want to change it, be intentional about the person that you're bringing in. The traits I mentioned earlier around curiosity, trustworthiness and communication, I think those are three of the key things right there. It's funny, my first Private Equity Partners said to me one day, I have a teaching degree, I have an education degree. I'm not a technology guy. So here I am CEO of a technology company, and my team, a lot of them are my executive team and senior leadership teams, a lot of them are the same type. And he turned to me one time, it was at a board dinner, and we were talking, we'd spent the day with the team. And he turned to me, and he just said, “Your team on paper from their education degree doesn't have the same level of degrees that some of our other companies, but the curiosity level, and the problem solving and the execution that you guys have, he's like, is off the charts.” And he said, “I’ll always take a team of curious leaders versus a team of degrees on paper.” And that really stuck out to me. And I found that to be true as we continue to grow and promote or hire, the more senior leader you are, the more curious you have to be, because you're constantly needing to be problem solving and evolving. So, I think curiosity, there's got to be trust, if you don't have trust, you don't have anything. You don’t have to agree on everything, in fact, you have to have so much trust that you don't have to agree on everything and neither party is worried about the other one bailing out on them. That is key, you can get really to raw conversations that sometimes need to be had as you're trying to figure out the business and where you need to go. And then that communication. Once you have the strategies and where you want to go, you've got to communicate up, down, sideways, and constantly. Sometimes I joke that I’m the CRO, which is the chief repeating officer, because people, you got to say things multiple times for them, because you say one thing, but they hear it now 800 different ways. And so, I think those are really three key traits that I would look for, as I was hiring a senior leader or CEO at a company.

David Morris  27:08

Well, thank you, Ron, for all of your teachings today.

Ron Alvesteffer  27:11

Thank you for having me. I've enjoyed the conversation. I enjoy talking with people who are interested, curious, if you will, on leadership in some of these different styles and different ways to grow companies. I think it's fascinating. There's so many different ways to do and I think there's just so much to always be learning around the subject. So, I appreciate you having me today.

David Morris  27:29

Our pleasure. 

David Morris  27:31

And to our HiPER leadership listeners thank you for your continued support and feedback. Stay tuned this season for many more HiPER leadership achievements. If you haven't done so already. Please subscribe to the HiPER Leadership Podcast to be the first to receive new episodes. And, if you have a big digital transformation you are leading, visit our website to learn more about how we help align teams and stakeholders for excellence at HiPERSolutions.com