Menu Close


In early February, Tom Feeney was basking in the reception of a lifetime as he spoke onstage at Orlando’s luxurious Rosen Shingle Creek hotel to a jubilant audience of his 600 top managers. “2020 will be a year to remember, by far the greatest in our history,” declared the CEO of Safelite AutoGlass. Feeney reminded his troops that he had addressed them at another resort in Orlando in 2009 during the depths of the financial crisis, and on that occasion he had pledged that his radically new “Take care of your employees” mindset would power the enterprise to heights they had never dreamed of.

Now, Feeney intoned, that had happened, lauding that the numbers for 2019 smashed all records. In the decade since his team last met in Orlando, Safelite had multiplied sales fivefold, to $2.4 billion, greatly strengthening the 71-year old stalwart’s dominant position in what’s mainly a mom and pop industry with 40,000 players. Safelite was notching double-digit margins—no need to mention that his managers were reaping all that bounty in the plodding, no-growth world of replacing windshields.

“I told the folks that we’d get to $3 billion in 2020,” Feeney, 68, told Fortune. “I came offstage with great confidence. I believed, and they believed too.” Feeney gave all assembled a $1,000 wristwatch, like the ones they’d received in 2009. Then, it was to express faith in what they could do. This time it was a thank-you for getting it done.

Within weeks of that celebration, says Feeney, business dropped “like someone turned off a light switch.” By the first week in April, Safelite’s revenues had cratered 45%, as its business of replacing windshields generally hinges on how much Americans drive. But what stands out about the company’s story is its highly original, keeping-your-base-intact response to the crisis. Feeney focused on sharply lowering costs to balance the drop in sales. But at the same time, he used furloughs, not layoffs, to ensure that almost all of his 17,000 employees remained on staff and ready to go when the rebound came.

When Feeney saw the coronavirus spreading in China in the days after the Orlando confab, he fretted that production would soon shut down in the nation where he sources half of his windshields. So he secured big advance deliveries from his Chinese suppliers in February and early March, and bought distribution centers that he stocked to the brim. “When I first heard the noise from China about COVID-19,” says Feeney, “I set about to get everybody else’s inventory for the recovery.” Starting in the second week in April, more families got back on the road, and volumes rebounded much faster than Feeney expected.

Feeney was able to quickly meet the surge by ramping up hours for service reps and technicians who’d been working part-time. Keeping people employed and on-call, and windshields set for delivery, enabled Safelite to gain an advantage over rivals that deployed sweeping layoffs and ran out of stocks. Those rivals can’t hire people back fast enough to recapture lost business, so those customers are going to Safelite. “Between the overall recovery and our gains in market share, we’re back to 95% of our 2019 volumes,” says Feeney.

A cheery jingle—and a killer business

Most people know Safelite from its cheery TV commercials. They feature feel-good vignettes like the spot where a mom calls Safelite about a broken windshield just before her daughter is about to start a basketball game at school. “Steve from Safelite” appears in the parking lot to swing the old glass out and the new glass in, just when the game ends, delighting the mom that insurance will pay and high-fiving the teen on her win. As the family drives off, viewers hear kids liltingly singing the four—the only four—words to the famous Safelite jingle, “Safelite repair, Safelite replace.” “That’s my 9-year granddaughter singing in the chorus,” Feeney proudly told me.

Until Feeney took over in 2008, the old Safelite bore little resemblance to the profitable, agile player that exploited the worst recession in recent history to expand its reach. When Feeney arrived in 1988, Safelite was struggling under a ton of high-yield debt imposed by the first of two private equity firms that would own the windshield installer for the ensuing two decades. Still, as a young executive, Feeney spearheaded building what’s still its bedrock business, Safelite Solutions, the arm that serves insurers, and fleet and rental car companies. “I helped get blanket deals with big insurers like Geico and Safeco so that they made Safelite the preferred supplier where windshields were covered by their policies,” he recalls.

Today, Safelite has partnerships with 17 of America’s top 20 insurers. When one of their clients gets a cracked windshield or side glass such as side vents, they have the option of requesting another servicer. “But the consumer usually chooses Safelite because we’re the only national company, and we’re the insurers’ preferred supplier,” says Feeney. He says that insurers furnish around 55% of Safelite’s revenues, while consumers who don’t have coverage for breaks and cracks provide one-quarter, and car and truck rental companies make up the balance.

In 2000, Safelite’s second private equity owner took it bankrupt, and its junk bond backers who had exchanged their debt for equity took charge. “Under private equity, the firms used all the cash flow for debt payments, leaving nothing for investment. When we were owned by the banks and former debt holders, they took out all the cash we generated. For the CEOs and the owners, it was all about milking Safelite for quick gains,” he recalls. By 2008, three CEOs had come and gone.

For Feeney, the problem was as much about culture and incentives as lack of capital to invest. Safelite was jogging in place at around $500 million in sales, and it wasn’t growing for a basic reason: It was rewarding its district managers not for expanding sales in their cities or regions but by how many windshield and side panels each of their technicians installed every month or quarter. “They called it ‘yield management,’” says Feeney. “If a manager had 20 technicians, and they had a high productivity rating because each one did six jobs a day on average, he’d get a big bonus.” But he’d get dinged by reaching for more sales, because it might mean hiring five more technicians who would start off doing four or five daily deliveries.

“The compensation plans had no rewards for growth,” he says. “Managers would sandbag at budget time by saying the threshold for bonuses should be fewer jobs per day than last year’s number, then they’d actually use fewer people who’d do the same number of total jobs as before but get the bosses higher bonuses. Setting budgets was all about setting limitations.” Keeping that tight rein on hiring—the ticket to big bonuses—made it impossible to reach for new orders.

It was a change in ownership, and a new CEO, that set the foundering installer on a steady course. In 2007, Belron, a British company that owns auto glass replacement businesses in over 30 countries, purchased Safelite. Belron, in turn, was controlled by D’Ieteren of Belgium, that nation’s largest auto dealer. (In 2018, private equity firm Clayton Dubilier & Rice, renowned for nurturing its investments for the long term, bought 40% of Belron. Today the remaining shares are held 55% by D’Ieteren and 5% by the family that founded Belron.)

Putting growth first

By mid-2008, the new owners had installed Feeney as CEO. And even though the financial crisis was ravaging sales, they endorsed his view that Safelite had the makings of a star if it shifted from drifting sideways to a vision that put growth first. To keep Safelite from failing, Feeney laid off 750 employees, roughly 15% of the workforce, canceled raises, and scrapped 401(k) contributions. But in a bold move, he decided to reward the workers that remained, even though Safelite couldn’t afford it, betting that the commitment would highlight his new priority of putting his people first.

“I reinstated raises for 2009 and restored the 401(k) match, moves that would cost an extra $3 million for the year, about 15% of the profits we’d been forecasting before,” he recalls. Then, in a big meeting with top managers, he pledged to pay the extra $3 million and still exceed the goal for the year, and announced a target of doubling sales to $1 billion by 2012. “Keep in mind this isn’t a growth business, it’s a flat business,” says Feeney. The CEO of Belron watched Feeney’s pledge in wonder. “He said to me, ‘You must be crazy to put a time stamp on a plan like that.’”

For Feeney, hitting the targets was all about rallying the managers, technicians, and service reps to push for growth. He believed that the best marketing was word of mouth, and that meant getting its technicians to “delight” the folks they were replacing windshields for. “We thought we could beat everything we could write on paper with the right people and right incentives,” he says. The key was convincing the workforce that they could spend their whole careers at Safelite, and make a lot more money, if they joined the march to win new business, and lots of it. “I wanted people to feel safe for a change, so I told them that the only reason anyone would have to leave was if they didn’t buy into the growth plan and culture that would make it happen,” he says. He notes that about 30% of the top 300 managers were “resisters” whom he fired or who departed, usually within a year, but over seven in 10 of the top brass in 2009 are believers still with the company.

The blueprint’s backbone was a new incentive plan tilted heavily toward growth. “I told the district managers not to think about themselves as pushing a fixed number of technicians to do more jobs a day, but as the CEOs of their own business in Columbus or Boston, where making more money for themselves meant making more money for their companies by taking more and more business from competitors.” Today, district managers who show double-digit revenue increases in a year can pocket bonuses that are 150% of base pay, and stars can make $250,000 annually.

Data-driven bonuses

For the 8,500 technicians who drive the trucks and install the windshields, Feeney pays bonuses tied to three metrics. The first is a blend of the Net Promoter Score awarded by the customers and their comments on the technicians’ attitude and professionalism. To rank high, the technicians had better consistently book 9s and 10s, the top ratings on the NPS scale. The second is “warranty,” or re-work, costs. “We tell employees to imagine each job is the only one you’ll do that day,” says Feeney. “The goal isn’t top speed. We don’t want them doing seven jobs in a day and going so fast that three of them need to be redone, so that we have to pay big warranties.” The third metric is the number of customers a technician services in a given week or month.

Big infotech investments lift productivity while also leaving more satisfied customers and less re-work. When a customer with a broken windshield or side glass contacts a customer service rep by phone or on the Safelite website, and requests an appointment, the rep uses A.I. to see if it has the part in stock, determine the location of technicians in the area, and match those factors with when and where the customer wants the work done. In almost all cases, Safelite is able to deliver at the time and place requested by the customer. Feeney says that 15% of the repairs are same day, 30% happen within three days, and all windshields get replaced in no more than four. If side glass is broken, it’s usually because a thief tried breaking into the car. Hence, Safelite fixes almost all side glass the day the customer calls.

At the end of each day, each technician gets feedback on his or her NPS, and customer comments via a smartphone message. Each month, they get a text showing how they fared on all three metrics, and informed of the bonus that corresponds to that overall score. Bonuses are paid in cash monthly. “Many of our technicians make over $100,000 a year,” says Feeney.

Of course, Feeney has no idea for how long or how deeply the COVID-19 downdraft will hammer his business. But surprisingly, given how Safelite played the rebound, he planned for the worst.

On the cost side, he established a plan to break even if sales dropped by 65%. The savings came mostly from reductions in payroll. The trick was to orchestrate the big shrink so that Safelite would re-expand to nearly its old size in a matter of days, like a musician expanding his packed-up accordion. The plan did include some layoffs. “We terminated all of the people who were getting poor performance reviews, around 600 of them,” says Feeney. The furloughs applied to around 2,000 salaried back-office employees, who didn’t work or get paid in the severest part of the downturn but remained on staff and retained health care benefits.

The hourly workforce, the technicians and service reps that make up 85% of Safelite’s 17,000 employees, provided most of the savings. Both frontline groups continued to get full health benefits but were asked to go on flextime, working about one-third fewer hours. It helped that as a regular practice, Safelite guarantees its technicians 10 months a year of work, and allows them to volunteer to take the other two months off without pay. “Employees like it in rural areas especially, because they can go hunting and fishing,” says Feeney. So many of the 8,500 technicians front-loaded their “10-2” schedules on hopes they would return to regular hours when work picked up.

As it turned out, the 45% drop in revenues was far less than the 65% Feeney had planned for. By the second week in April, sales started rising, and they’ve increased every week since. Almost all workers are back to their full schedules and pay. “Using flextime instead of laying people off kept us on the tips of our toes,” says Feeney. Although sales will be down around 20% overall for the year, he says, they’re now running at around the same weekly levels as in 2019.

Which, in the midst of a pandemic and the highest levels of unemployment since the Great Depression, is about as close as you can come to managing a miracle.

More must-read finance coverage from Fortune:

  • Why black-owned businesses were hit the hardest by the pandemic
  • George Floyd protests force Britain to reckon with its role in slavery, leading some companies to pay reparations
  • This influential crypto CEO warns that hyperinflation will be “the next big problem”
  • Looking to invest in companies that care about equality? This NAACP-backed ETF may be the answer
  • 6 reasons Boeing’s financial picture may be brighter than most assume



Source link

Posted in Business Ideas News and Topics

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.