By: Bob Orsi
Founder/CEO
FIRST CLASS INVESTMENTS
It took me years to realize that I could not do everything myself and that I needed to build a great team. It took trust and a bit of exhaustion in order to relinquish full control. I did not wake up one day a team builder. I gave up management control in stages. I learned slowly the power of culture and team building. The rewards were many fold.
I had three stages of my business career. In the first stage, I spent twelve years in the public schools including ten years in administration. In the second stage, I became a business owner when I opened my first preschool. As that business grew, I had other owners join me. First my wife at the time and later a former school district colleague joined me in running the company. In seventeen years, we built that company to thirteen locations and earned a place in the Top 50 companies in the industry. The third stage of my career was buying a preschool company out of bankruptcy court and building that business with a friend from the Young Presidents Organization. We started with sixteen locations of which we owned none of the real estate and grew to thirty one locations, of which we owned twenty two of the school properties. This company ended up as the thirteenth biggest child care company in the country.
When I opened my first preschool, I knew a great deal about educating young children and running a school but I knew nothing about running a business. I visited other preschools and saw them through the eyes of an educator. Most of these schools had very weak educational programs. I spent two years editing and writing a detailed early education curriculum of two thousand lessons which were used in my schools for thirty years.
In the eighties, there was great growth in the preschool industry, as women became more engaged in the workforce. When I had two schools, I could do everything myself: manage the managers, be a face to the public, deal with licensing, market the schools and supervise instruction. It was tiring but it could be done.
In the late eighties, I had an opportunity to buy several schools from a company that expanded too fast and ran out of money. I bought their four newest and most cash negative schools and two schools under construction. A former colleague from the public schools bought into our venture and joined me. I now had a competent educator and manager as my partner to share the load. Even though I completely trusted her, I had a hard time letting go.
After about six months of underutilizing my partner and over extending myself, I knew that I needed to change things. I then started a long journey of building a strong team. In stages, I continued to see the value of the organizational strength that comes from building a strong team.
First, we invested in a Regional Manager. Then we divided our ten schools between my partner and the new Regional Manager. Second, we began regular staff meetings with the site managers. The site managers that we inherited with our business purchase, did not share our values. The next thing that we did was to develop a formal management training program to bring our own people up through the ranks. This involved extra expense to pull potential managers out of their classroom and train them with our best site managers. Virtually all managers and workers in the child care industry are women and we gave them a chance to advance. It was a great investment in people.
Next we opened our books to the managers. Every manager got a simple report of her weekly child count and her labor costs. Each month she got her school’s financial report. We started giving bonuses to our managers based on their efficient use of labor. We found that this made our schools more profitable.
Additionally, we started to pay bonuses to our managers on enrollment growth and school profit. It is much easier to run a school at about 2/3 full. It is much less work but much less profitable. After all the fixed costs are satisfied, a preschool really starts to make money. Sharing that profit and rewarding the hard work that it takes to fill the schools, made our company much more successful. Now every manager had the financial information for her operation and every manager could share in the prosperity of their school.
The next big step was the evolution and clarification in our management meeting rules. Our Golden Rule was that the best idea wins not the idea from the most senior person speaking. Everyone was encouraged to defend their proposals and listen to others. Our debates became spirited but respectful and we discussed until a consensus was reached. It was not a complete democracy because I still reserved the right to decide what was the “best idea.” However, that option was very rarely utilized.
As our team strength built, my role changed. I focused on real estate, marketing and government relations. My partner who was now president, ran the management meetings and eventually, I only came to the Management Meetings when requested.
In the late 1990s my partners and I sold that company. The acquiring company undid all of our management, training and compensation programs. They cut out all our performance bonuses, management training programs and management meeting rules. Within two years the profit margin was down to 40% of what we produced. This experience reinforced my desire to build even better team management, if I got another chance.
After I sold my preschool company, I went looking with a friend for business to buy. I was not looking for a preschool company, but one found me.
Another of my friend was in the turnaround business and he was hired by a cradle to grave education conglomerate to stave off bankruptcy. When he started, he called me six to eight times a day asking questions. Over the ensuing months, the calls dwindled to two or three per week. Three weeks later, he called and told me that the company had filed for bankruptcy. He told me that the preschool business, Sunrise Preschools, was the only profitable part of the company and I should buy it.
Every big childcare company in the country was looking at Sunrise. It took me two months of daily calls to the court appointed administrator to get in line. Sunrise had oversized inefficient schools with tons of deferred maintenance but it also had a highly recognized name and top quality senior management. It took persistence and excellent work by my partner to secure the purchase in the bankruptcy court.
My partner is a certified accountant and an experienced CEO, but he did not know the preschool business. We divided responsibilities. Among other great accomplishments, he developed the best and fastest financial reporting system in the industry. We both realized the great leadership and culture building acumen of the existing operations manager. We soon made her President.
The strength of the President and armed with timely financial measurement tools, we were in a position to empower and develop a great management team.
Sunrise had been drained of capital by the prior owners. The positive cash flow was taken to fund other failing company enterprises. There was deferred maintenance on the schools, no supplies, or instructional materials.
On the first day that we owned the schools, I sent a letter to every employee saying that we would live by three rules: We would 1. Invest whatever was necessary to build profitable enrollment, 2. Waste nothing, 3. Share the fruit of our labors.
We set up separate monthly meeting of directors and of assistant directors. These site managers developed lists of material and supply needs and as well as deferred maintenance at their school.
The Operations and Regional Managers prioritized the needs and we worked together to fulfill these needs. These managers then accessed the needs of their staff mangers and the Team set up monthly training for these site leaders. Preschool are open twelve hours per day and the site managers wanted better help running their schools, particularly in the hours that they were not on site. The Management team developed the Director in Training Program to train the captains and the lieutenants of the school site. This was so successful that the hiring of all of our managers was coming from within our ranks. Next the Management Team developed the Leadership in Training Program for the sergeants and corporals of school site management. Both of these programs elevated our people and our staff saw clear paths to advancement.
We did invest in growing profitable enrollment. We acquired eight schools from a competitor and improved their property and their operation. We also build twenty beautiful new schools and moved existing operations out of 30 or 40 year old buildings.
In order for our regional managers and school site managers to make meaningful decisions and to effectively operate their school, they needed information normally reserved for senior manager and they needed it quickly. My partner developed and continually refined a financial reporting system that was user friendly for site managers. By 10:00 AM on Monday, every manager had the revenue and cost by age level for the prior week. They got these numbers for infants, toddlers, three year olds, four year olds and school age. This allowed them to know very quickly what problems to fix and what opportunities to grasp. The director received the same information for every school. They knew how they were doing relative to ever other manager and who to ask for advice.
To fulfill the third element of our management creed, we rewarded performance. Regional Managers were reward on the performance of their school and about 30% to 35% of their total compensation came from bonus. School site Directors and Assistant Directors made bonus on enrollment growth, labor control and bottom line and bonus was 20% to 30% of their total compensation. Our base pay for site managers was below market but actual compensation was above market. We never lost a manager to a competitor.
The Senior Management Team was made up of the two owners, the President and the VP of Finance. Our group rules were the same as the Management Team rules: the best idea wins. Our decision making standards remained the same: invest in profitable growth, waste nothing and share the benefits. These two Management Teams managed an operation of 5,000 children and 600 employees.
My partner and I knew that we were not perfect and we did not know everything. Empowering people, giving them the training to grow and the resources to succeed set the stage for success. We gave our management teams the responsibility to solve problems and aligned their rewards with the company’s success. A supportive culture, transparency and collaboration built great team spirit and an effective and successful company.
