Steve Tsengas learned about strategic planning on the job.
The founder, president and CEO of OurPet’s Co. started out in the
mid-1960s as a 24-year-old industrial engineer for Eastman Kodak,
where he started to wonder why the company paid employees based
on how many rejects they found when the goal was to supply a quality product.
One day, he asked a co-worker what about her job excited her. The
middle-aged lady considered his question and told him about the time
the department head personally thanked the employees after a successful production push. That incident, she said, had happened 17
years ago.
That incident has helped shape how Tsengas has grown his pet
product company to 2006 revenue of about $10 million.
Smart Business
spoke with Tsengas about how entrepreneurs can reshape a company to ready it for growth.
Q: How do you achieve business growth?
An example I use is a biplane. It’s great for low speeds, it’s highly
maneuverable and you can do all kinds of things with it. That kind of
a small company has its advantages. But in about the fifth year, when
you reach about $5 million to $6 million, you get to a phase where you
are becoming a mid-sized company. You’re dealing with the Wal-Marts
and the PetSmarts. The organization continues growing and you need
to hire higher caliber people.
Then your growth develops exponentially in the takeoff stage. This
is where you need to come out like you’re going through the sound
barrier. If you’re still maintaining a biplane, it’s going to start shaking
apart.
So you have to change the shape into a plane that looks like a jet.
Our goal is to maintain about a 40 percent growth rate over the next
three to five years.
You need to go through that phase, then my role keeps changing,
becoming more and more administrative and financial and shareholder-related.
Q: What is a major pitfall business owners should avoid?
If you look at the entrepreneur’s personality, your classical hard-driving entrepreneur wants to stay in the decision role. He does not want
to let go, has not very high confidence in other people, feels he’s the
one who can do it the best — which is great in the beginning, but you
get to $5 million to $7 million and that’s no good.
The biggest problem occurs when entrepreneurs cannot make this
transition. They cannot let go. They still want to be flying the little
biplane instead of understanding that the more you let go, the more control you have.
Q: How can a CEO take that step?
It goes back to having participation and involvement of people in
your business plan.
The legitimacy of involvement is because it affects the decisions in
the organization. They can make a contribution, they can help with
the implementation and they can make it work.
That’s a legitimate situation to involve the people, subordinates.
The heavy emphasis should be on preparation of a business plan,
the development of goals. My role goes from controlling to monitoring and coaching.
At the beginning, you may spend 90 percent of your time on technical and manufacturing problems. By the fifth year, it becomes
more and more administrative and financial.
It becomes more about putting systems together for controlling
the organization and interfacing with customers. Now my emphasis
is measuring the output, through the business plan. As long as the
variances are under control, the organization is in control.