TEKMORE Case Study
Company Division Blends Disparate Entities and Triples Operating Profit in Down Market
Note: Names have been changed because parent company does not want to alert competition.
After achieving record earnings growth in his small division, a $200 Million high-tech manufacturing business, Division President Claude Hanson faced the most challenging assignment of his career. He was promoted to President of TEKMORE, the combined global entity of his small division and a newly acquired company that was made up of seven very small tech companies. With $750 Million in revenue, TEKMORE was the largest division of parent company Acmetech and strategically, the only growth division.
TEKMORE was born with many challenges. All seven of the acquired company entities were different – in products, niches in technology, location (different countries in Europe and Asia), and distinctly different cultures. All seven companies had something in common – the tech bubble had burst and dragged them all down in sales and profits. Morale in all was low, newly acquired managers exhibited a “deer-in-the-headlights” complacency, and previous efforts to rebound were halfhearted and unsuccessful.
Additionally, Acmetech’s CEO had high expectations for TEKMORE: improve operating profit significantly, globalize the company, and focus on global customers, all while leading simultaneous growth initiatives in anticipation of a tech rebound – and do it fast. Hanson said, “I had hoped for a dream job for my promotion, and my boss said, ‘Congratulations, Claude, we’re giving you our entry into the tech world. It’s a mess of a company and tech is down, but I expect you to produce record profits and produce superior returns, this year!’”
"Thanks to Topgrading and the improved team, operating profit tripled over two years and TEKMORE gained the confidence of major customers around the world."
- Claude Hanson, Division President
Corporate assumed Hanson would “make do” with his inherited management team, as any changes could be disruptive and harm short-term results. But Hanson knew that hanging onto mediocre or low performers in management would make achieving the company’s goals impossible. Building a strong leadership team was his first priority. Before the acquisition even closed, Hanson consistently communicated his vision, “We can only win by having the best people in the business.”
Hanson had read the book Topgrading, and asked his VP of HR contact Topgrading for help. The plan emerged: Topgrading would help Hanson create an A Team, all managers would be trained in Topgrading practices, and the methodology would cascade down from the new top team to all levels of management.
Hanson had numerous meetings with senior managers and concluded that many were not up to the challenges. So, a Topgrading Professional assessed and coached 20 senior managers. All managers embraced new, challenging goals and Individual Development Plans. About half rose to the occasion with improved performance, and they demonstrated A Potenial. The other half, one at a time, realized they would not perform at the A Player level and moved on to other jobs. Replacement candidates were assessed by Hanson and the head of HR, and “second opinion” interviews were conducted by the Topgrading Professional. Within a year Hanson had his A Team.
Hanson’s Advice for Topgrading a Division
- Quickly make the tough people decisions; procrastinating is worse for everyone.
- Be thorough and professional in the assessment process by using all available information on a manager, multiple meetings, and a complete tandem Topgrading Interview.
- For key roles, use a professional to assess both internal talent and candidates for selection.
Overall, Hanson’s inherited top team was weak and became strong. Initially there were only a few A Players and an organization structure that didn’t fit the business needs or strategy. Through Topgrading, low performers were replaced by A Players, and the resulting team eventually consisted of 100% A Players.
Just like the old ad, “Everything goes better with Coke,” everything in business goes better when the top team is an A Team. “We drove Topgrading down throughout the company,” said Hanson. “HR did a great job partnering with hiring managers to help them succeed, and as tech rebounded our results were terrific.”
Before Topgrading, the hiring success of managers in Hanson’s division was about 25% (percent of new hires who turned out to be high performers in the roles). Of the 25 internal promotions or transfers made using Topgrading, 95% turned out to be A Players in their new roles. Of 70 external hires made, 97% were A Players.
Hanson’s new high performing team turned the business around quicker than anyone thought possible. Operating profit tripled over the next two years as TEKMORE gained the confidence of major customers around the world. Hanson was able to delegate more to A Players and decrease his hands-on involvement. The team became recognized as the best in the industry.
Hanson’s Bottom Line: “Even with a mediocre senior, and a broken business, Topgrade and your A Team will figure out how to succeed.”