Step Away From the Foosball Table. Financials are Important, Too.
Andy Medley and Scott Hill have always been competitive. So much so, the cofounders of Indianapolis-based marketing technology and promotions company PERQ say their friends insist they play on the same team. “When you put up a score it’s hard not to want to win,” admits Hill, who joined forces with his college roommate in 2001 to launch their firm, which initially focused on generating sales leads for auto dealerships.
They built an office culture around the competitive spirit and saw their company flourish and expand into three different entities under the umbrella of what was, until recently, CIK Enterprises. In 2006, the company was recognized as one of the fastest growing in Indy and one of the best places to work in the city.
Then the recession hit, devastating PERQ’s core clients – automotive, retail and newspaper – and nearly putting them out of business. Painful as it was, the crisis forced the founders, both 37, to rethink their priorities. “We realized we were spending more time playing in the locker room than we were winning on the field,” says Hill.
They dusted off their copies of Jack Stack’s “The Great Game of Business,” began sharing their financials with employees and gave everyone a vested interest in the final score. This new focus has helped the now 70-employee company grow its revenues from $24 million in 2012 to a projected $30 million for 2013.
Entrepreneur spoke with Medley and Hill about how they channeled the competitive spirit away from the Foosball table and into running the business.
Entrepreneur: Did you introduce the concept of business as a game early on?
Hill: We’ve always thought business can be looked at as an adult strategy game. There’s competition, teammates, a score and a number of strategic options you can take to perform better… but as the business grew we lost our way.
Entrepreneur: Why was that?
Hill: Our financials got a little messier. We had three business units, and that added a level of complexity. It’s hard to play a game and have good competition when the score is tough to read.
Medley: It was also cultural. Around 2006 we won best places to work in the small and medium size business for Indianapolis. But we were more focused on making the environment inside great for our employees than we were on providing value to our customers.
Hill: Because we’d had early success with the culture we had created we thought if we just kept feeding the culture of fun, growth would follow.
Entrepreneur: Can you give an example?
Medley: There was one time when we were shut down for a couple of hours over five days in a row playing games during a corporate challenge at one of our busiest times. The value we were trying to provide our customers got lost.
Entrepreneur: When did you realize this was a problem?
Hill: Andy and I both went to a Harvard owner/president management program. That really opened our eyes. We had good instinct as entrepreneurs but we were missing some acumen as businessmen.
Medley: The recession essentially broke the business at a time when it needed fixing. We had three rounds of horrendous cuts. At that point we were operating as different entities, in different buildings. For me, it got us back to the basics. We started working on revenue per employee and sharing the financials. At that point, it wasn’t about creating competition but educating employees about where we were at.
Entrepreneur: You’re proponents of open-book management. Did you share company financials with employees before the crisis?
Hill: Before we showed the numbers but we didn’t have the level of engagement we have now. We have a board that people walk by and can see where they stand every day.
Medley: In any game it’s not fun if you don’t see the score or are told the score 40 days later. That daily scorecard enables everyone to be able to see how we’re doing in real time.
Entrepreneur: Are you concerned that employees will misinterpret the numbers, maybe think the company is flush when it’s not or run for the exits when things look ugly?
Hill: We go beyond sharing revenue. We share all the expenses down to the profit the company is making. If you’re not sharing numbers, employees will always assume you’re making a lot more money than what you actually are. Until you show them the mechanics of the business they don’t understand how hard it is to have a dollar left over from the thousand dollars you brought in.
Entrepreneur: Besides job security, do employees have skin in the game?
Hill: Everyone plays for 5 percent of their base on a six-month basis. We give them tiers and at the end of six months we either hit it or we don’t.
Entrepreneur: Your office culture still has a fun element – scooters in the lobby, a half basketball court in the game room and a full gym with showers. How is your corporate culture different than it was in the early days?
Hill: Now when we talk about business as a game, winning at that game should be the most fun, not the celebrations in the locker room. Those are rewards for performing well out on the field. But we still have a lot of fun and competition internally. For example, teams are now competing against each other to raise money for different charities.
Entrepreneur: Do you worry some people will be put off by all this competition?
Hill: If you have a lot of competition on a team but no firm direction of where it’s trying to go, I’m sure it could turn internal. Since there is such clarity around what we’re trying to do, the strategy, the daily actions and the fun rewards, we have a healthy team. The nature of how we manage the company attracts people who enjoy seeing the score and who embrace competition.
Medley: When you walk in through the doors you can get a sense of who we are pretty quickly. It’s not right for everyone. That’s fine. We try to be very upfront about our culture and make sure it’s a good fit before we hire.
Sarah Max is a freelance writer in Bend, Ore. She has covered business and personal finance for more than a decade for such publications as Barron's, Money, The New York Times and The Wall Street Journal. In 2009 Sarah got a first-hand look at the ups and downs of entrepreneurship when she helped launch 1859 Oregon'’s Magazine, a bimonthly print and digital magazine for which she is editor at large.