Lexon Corp. was in its fifth year before its owners realized the Polaris-based software design and consulting company might be headed for trouble.
Each of the four owners knew his own division of Lexon well enough and had grown it accordingly. The problem was, nobody was keeping watch over the company as a whole. Lexon was losing its unifying focus.
“We could be four companies right now,” says Kirti Jackson, who runs the manufacturing consulting division for Lexon, while co-owners John Gregor, Sal Aziz and John Dunning run the technology, health care and software development divisions, respectively. “That’s the worst thing that would’ve happened.”
To bring cohesion back to Lexon, the owners realized they’d need more than what the four of them, focused on their own individual divisions, could give the company.
They decided to hire a general manager to run the day-to-day business operations while they continued to lead their own divisions.
“That does not mean we absolve ourselves of leadership,” Aziz stresses. “The four of us are leaders in this company. But because we are individuals in very focused business areas, there needs to be a coordinator of all these. Therein lies a fifth leadership position.”
Sailing in rough waters
Lexon’s loss of cohesion became especially visible to Dunning in May 1995 when the company moved from one small office to a larger one in the same building on Busch Boulevard.
“When we were very small — six, eight, 10 people — we worked very closely, and it was very easy for each one of us to have really a good idea as to what was going on in the company as a whole just by being so small and in close quarters,” Dunning says. “As we started to grow, the first thing that happened was somewhat of a culture shock when we moved into an office that had two sides. That was when people stopped seeing each other as much and, therefore, people became out of touch with things they were not working directly with — including the owners.”
The polarization wasn’t helped by the fact that Lexon’s four owners were becoming so engrossed in their own individual teams that they lost track of general operations. Basic business essentials, such as developing human resource policy manuals, fell through the cracks.
“It was mainly administrative, corporate things that were being ignored until it became so critical that someone had to do something about it,” Dunning says. “Then it was whoever was in the office would take care of it.”
Cash flow management became a problem, and although the owners were clear on their philosophies of running the company, they had trouble articulating their views and making sure the employees were all working toward the same goals.
“From start to finish, everything it takes to run a business, we were doing it in our own way,” Aziz says. “Not that we weren’t capable of handling and performing all those functions, but when you don’t give something the right amount of time, it isn’t going to get done — or get done right.”
The owners began to realize they had reached a crossroads: either remain a small, entrepreneurial company or position themselves for growth as a professional corporation.
A search for new direction
Making the decision required Jackson, Gregor, Dunning and Aziz to face difficult questions, especially once they agreed they wanted to grow Lexon into a large corporation.
Early on, they discarded the idea of one of them taking on the general manager role.
“It was clear that was neither our gift nor our desire,” Dunning says. “We, from day one, were focused on developing our teams and fostering growth. None of us are business manager people from our past history. We just felt it was wiser to hire somebody in to take care of that.”
Next, the owners considered the plain expense of hiring an experienced, corporate-type manager.
They could not pay peanuts and expect someone to fill the critical roles of human resource director, CFO and others. Yet cash flow was an issue, even though the company had grown to almost $3 million in annual revenues in just five years.
Ultimately, they decided to aim high and look upon the general manager’s salary as an investment in the company’s future growth.
“We said we’re going to spend a tremendous amount of money getting somebody in here that’s not going to generate any income but that is going to generate the potential that we need,” explains Dunning.
Once the basic decision was made, the owners grappled with finding the right person who not only had the appropriate skills but who could fit in. “I often thought, ‘We’re never going to find somebody to get along with all four of us,’” says Gregor.
In addition, they realized they’d need to surrender some of their own duties. Gregor, for example, would no longer be responsible for hiring new employees; Jackson had to relinquish his job of examining accounts receivable and talking to banks.
“The entrepreneur that fails never lets go; but to let go is scary, too,” Jackson says.
After a two-month search, the owners hired Roy Smoot, a former senior vice president at Fifth Third Bank, who came recommended by one of Gregor’s friends. Smoot’s resume was practically written for the Lexon general manager job description, Gregor says.
Smoot had:
- Helped launch a local family business, Pinnacle Performance, which aims to help companies increase employee performance through rewards of tangible gifts.
- Held six positions at Fifth Third, with responsibilities including training and development, corporate accounts and retail management.
- Worked in personnel consulting and recruiting, as well as sales.
Although Smoot declined to name specific figures, citing his privacy and that of the owners, he confirmed that Lexon hired him at a salary almost equal to that of an owner. On top of that, there was the promise that Smoot, like other employees whose performance merits it, will one day share ownership of the company.
“We could have taken his salary easily and stuffed it in a number of pockets and been much more comfortable,” Dunning says. But that wouldn’t have yielded the leadership Lexon so sorely needed.
Running a tighter ship
Once Lexon’s owners faced the reality that someone else would be running their company and grew comfortable with Smoot’s capabilities, the new GM was left to discover his role.
Smoot wasn’t ignorant to the importance of finding a way to fit in and learn the company’s culture.
“The way I addressed that is when I came in, I spent a lot of time in one-on-one conversations with people, and not just the owners,” Smoot says, noting that he also talked to the company’s vendors and bankers, for example.
In addition, he pored through the Lexon files, looking at the company’s documented history.
Then, of course, Smoot had to learn about the owners and find out more specific information about their goals for the company.
He gathered all four of them in a room, and for half a day, they discussed their individual positions and the company as a whole.
“The energy in that room increased greatly. They were laughing and smiling with each other. They started doing the ‘I remember when . . .,’ ‘That was a great decision you made about . . .’ and enjoying each other,” Smoot says. “I had a sense they had not done that often.”
Keeping cohesion among the four, in fact, has been one of Smoot’s biggest challenges.
Often, Jackson points out, individual owners go to Smoot to let out steam over a problem with another.
“Early on, there was frustration, and I was not shy in expressing to them it was hard to nail them down,” Smoot says. “While they are different,
there are common threads. The frustration is born out of not channeling that in the same direction.”
The four owners say Smoot’s efforts let them manage the company more by committee. For example, they now meet every Monday morning for one to three hours to discuss company issues. Before Smoot joined the company, the four seldom found time to meet.
Aziz points out that the dynamics between the owners and Smoot have worked out fine, but there’s another bonus: The four owners get along better.
“With more communication, that fosters better understanding amongst everybody,” he says.
While Smoot gets the owners’ input on decisions, especially ones with long-term financial input, he lays the foundation so they do not have to spend as much time on day-to-day management issues.
That’s exactly what the owners are paying him so handsomely to do.
“There haven’t been a lot of things here at Lexon that needed to be corrected,” Smoot says, “but a lot needed more structure, more form and more direction while also allowing flexibility — and that’s not easy.”
Sometimes, he just needs to remind the owners that, with him at their disposal, they can address growth issues they would’ve previously discarded due to time constraints.
For example, he discovered one software project that only sold three units in 1998.
“I asked what it would take to sell 12 of those. They said, ‘We can’t. We don’t have the resources.’ You have to look at, ‘No. What would it take?’” Smoot says, because now he can provide the resources.
“We are completely refocusing, redefining, redoing our marketing materials,” Smoot adds. “They are allowing me to drive that, with, of course, all of their input.”
Other business practices under Smoot’s coordination include:
- Quantifying expectations of sales strategies in order to measure results.
- Restructuring banking services by taking advantage of more electronic services, for example, and rearranging debt.
- Maintaining contact with legal counsel.
- Restructuring human resource processes, including hiring and performance review procedures.
Smoot points out that his general manager role requires him to have a lot of respect for Lexon’s owners.
“Don’t ever forget who took the initial risk and who built the business,” he says regarding advice he’d give to anyone considering a similar position. “You didn’t do it. They did.”
He says he considers it an honor to help Lexon’s owners build a company.
“I will not violate that trust for anything,” he says. “It is a very, very special opportunity.”
On the flip side, the job requires mutual respect.
Even though Lexon is growing from a small entrepreneurial company to a corporation, Smoot and the
owners saw from the beginning the importance of abandoning rigid parameters on either side in order to make the relationship work.
“We all wear a lot of hats,” Smoot says. “I’ve cleaned coffee pots, and so have they.”