The Sales Manager Who Fired The Owner, Sold A Stake To Private Equity And Lets Workers Name Their Goals
Susan Adams , Forbes Staff
Ron Alvesteffer, 47, is CEO of Service Express, which does on-site maintenance for companies’ data centers, including repairs, troubleshooting and installations. Based in Grand Rapids, MI, the company employs 321 and has 34 offices in 16 states. Revenue last year came to $59 million. SEI made Forbes’ 2016 Best Small Companies list earlier this year, in part because of its unusual employee goal-setting policy. Twice a year managers meet with reports who lay out goals, including compensation, and SEI pledges to support employees’ wishes. Alvesteffer implemented the plan after first talking the company founder into letting Alvesteffer run the business. Later Alvesteffer persuaded the owner to sell a stake to a private equity firm. In this condensed and edited interview, Alvesteffer explains why.
Susan Adams: How did you become the boss?
Ron Alvesteffer: SEI started as part of a computer hardware reseller, Great Lakes Computers, in 1986. It branched off and became Service Express in 1993. I was hired in 1997 as the sales manager.
Adams: How did you go from sales manager to CEO?
Alvesteffer: The company grew and in 2002 we had 50 employees and $7 million in revenue. The owner was more of a startup guy but we needed to scale. That wasn’t his strength or his passion, and it was mine. He was gone half the time. Then we had an inventory issue and the owner and I got into what you might call a heated discussion. We went into his office and I said, you built this company but we’re growing and we need systems and processes and strategies to scale. That’s what I’m good at. I need you to leave the company and let me grow it. I like to say I fired him. I said, if it doesn’t work, fire me, but I don’t think we’re going to make it the way we’re going. He looked at me for a second and then he said, you know what, you’ve got a good idea.
Adams: What changes did you make?
Alvesteffer: Twice a year we have vision talks with our employees. Every leader sits down with every direct report, in January and in July. Our employees write down their personal, professional and financial goals. The conversations become, what kind of training and what kind of resources do you need to achieve those goals. At each meeting we ask, how are you working toward your goals and how have your goals changed.
Adams: What are some goals people have achieved?
Alvesteffer: Someone bought a car, another bought a house, one ran a marathon.
Adams: Why would I want to tell my employer that I wanted to run a marathon?
Alvesteffer: So we can support you. It might mean you need to take a long lunch break to get your run in. I have a saying, tell me your goals and I work for you. Don’t tell me your goals and you work for me.
Adams: What’s the most common goal that people set?
Alvesteffer: On the personal side it’s always, I want to lose a few pounds. Professionally it could be moving to a leadership position, moving to a different department, advancing to a new role.
Adams: Aren’t you asking people to ask for big raises?
Alvesteffer: I hope so. But we don’t just hand out raises. We say, what value would you need to bring to the company for me to pay you that amount of money. We have a performance measurement system where we measure everyone’s individual results. Sometimes they get there by the end of the year. Sometimes it takes three years.
Adams: Tell me about a recent example of a professional goal someone achieved.
Alvesteffer: My service director had two service engineers who wanted to move to Denver as soon as we were ready to open an office there. But that was four or five years down the road in our expansion plan. There was a salesman in Columbus, OH who had been with us over 10 years, whose kids were grown who was interested in starting a new office. We told him about Denver. He loved the idea. At the time, we were planning to go to Washington, DC. We replaced that with Denver. The salesman will be moving by Labor Day.
Adams: What if Washington, DC would have been a better move for the company?
Alvesteffer: Denver is a great market for us and I’d rather go with existing employees than start a new office in a new region with all new employees.
Adams: Where did you get the idea to run things this way?
Alvesteffer: I don’t have a business degree so my business acumen didn’t get in the way. I don’t love technology. But I’ve always been a goal setter myself and I’ve always been involved in helping people. I heard a tape by motivational speaker Zig Ziglar where he said you can get everything you want out of life if you help enough people get what they want.
Adams: Why did you sell out to a private equity firm?
Alvesteffer: I had almost the same conversation with the founder that I had in 2002. I said, you’ve been a great owner up to this point but I don’t think you have the resources to invest in where we’re going. We need another financial partner. He said, I think you’re right. I need to get off the bus, I’m kind of done.
Adams: How much money did you need?
Alvesteffer: It wasn’t a set dollar amount. I just needed access to capital and professional financiers who understood the business, the market and were willing to provide resources. This was a year ago.
Adams: What were you trying to achieve?
Alvesteffer: We wanted to do some acquisitions, to open more offices more quickly, to pursue new sales strategies.
Adams: Did the investors buy out the owner?
Alvesteffer: Not completely, but they bought the majority of the company.
Adams: Walk me through your process of finding the right private equity firm
Alvesteffer: We hired Ernst & Young’s investment banking division, which specializes in technology out of San Francisco. We shared our vision with them, our strategies. We said, we want to find companies that will buy into our corporate vision and the way we deal with employees. They identified 15 or 20 companies and we narrowed the list down to half that many and did on-site visits with them. Pamlico Capital in Charlotte, NC stood out and we went with them.
Adams: Didn’t you have another deal that fell through?
Alvesteffer: We did. The year before we went down the road with Pamlico we were approached by another private equity firm.
Adams: Why did it fall through?
Alvesteffer: Initially they said all the right things to get us interested. But then they started back-tracking on everything.
Adams: What did you learn from that experience?
Alvesteffer: We tried to do the deal ourselves without an investment banker. We learned that was a bad idea. You need to run a process and get multiple firms involved. Also be very clear about what you’re looking for from a partner and hold to that.
Adams: Weren’t you worried about giving up too much control?
Alvesteffer: Worried is too strong a word. I can’t say it wasn’t a concern. But I’m a hired gun, even though I have equity now. Some firms have operating partners who come along and assist you. I didn’t want that. We’re coming up on our year anniversary and they’ve been fantastic partners.
Adams: Didn’t they give you a time frame to boost numbers so they could make a profit and exit?
Alvesteffer: I asked them point blank about time frame before we closed the deal. They said we don’t believe in time frames. We want to run a great company and continue to invest in it. When it’s time to exit, you will know and we will know and a great replacement will come along.
Adams: What convinced you that they really meant this?
Alvesteffer: The reference calls we made to the other companies they owned. I didn’t ask for the top three references. I asked for the whole portfolio. I got all the CEO names, the CFO names, the chief operating officer names and the heads of sales. With my executive team we went through the whole list and randomly picked who we were going to call. We compared notes and that authenticated everything they were saying.
Adams: Do you have a revenue goal?
Alvesteffer: Our BHAG, our Big Hair Audacious Goal as Jim Collins would say, is $500 million in revenue by 2025. You don’t have to choose between great and big. If you’re great, that can drive you to be big.