100% ESOP Owned PFSbrands CEO Shawn Burcham on open-book management and the rewards of risk-taking
Shawn Burcham founded Pro Food Systems (PFSbrands) over 20 years ago because he believed that he could run a wholesale food and equipment company better than the competitor he was working for at the time. PFSbrands is parent company to Champs Chicken, Cooper's Express, and BluTaco, in addition to being 100% employee owned and completely run with open-book management. Ladders spoke with PFSbrands founder and CEO Shawn Burcham to find out more about open-book management companies, the reward of taking risks, and employee stock ownership plans (ESOP).
What's the biggest career risk you've ever taken?
"I guess the biggest career risk was leaving a full-time job and actually starting a company in 1998. Really when I left my job I was with a competitor, so I was leaving a particular employer and ultimately going out and competing with them and starting something from scratch out of a garage. It was a big leap. We went from a double income, no kid family to a one kid, no income family literally almost overnight. So that was a big risk. We jumped all in and took a big risk in starting a company. The financial risks and things that come along with that were significant, so you're taking away what was a stable income and going out there and ultimately just having to go out and earn it on your own, so that was a big risk."
What did you learn from that?
"It did work out, but certainly there's failures along the way and one of the things...in fact the first venture we had when we started the corporation was that we started a coffee and cappuccino company and ultimately that side of that business failed. So I jumped into the chicken program. I don't want to necessarily say that we learned it, but just continued to have a tolerance of failure in my life. As a leadership approach, and the way that we lead and our company is to make sure that we have a tolerance of failure because failures are ultimately what make people successful. There's too many people that are scared of the failure and scared to take those risks because ultimately our society doesn't necessarily tell people about the rewards of risk taking, and really the rewards of failure."
PFSbrand is 100% employee owned. Does that change your role of CEO at all?
"That's a great question. No, I don't think it does. I do think it takes a certain mindset for a CEO to lead an ESOP company, but ultimately it's an ownership thinking mindset and we instilled that type of mindset and that type of a culture within our company before we went to an ESOP. So, I don't think it really changes my role, however you do have to be a unique individual for an ESOP. The egos have to be put aside. You have to lead in a servant-leadership approach."
Does that change what you look for in an employee?
"I think the best companies, regardless of whether they're ESOP or not, have a particular type of individual that they look for and that has to do with their culture more than the fact that they're an ESOP or a non-ESOP. So the culture of the company should be the determining factor there, whether you're an ESOP or a non-ESOP."
So how would you describe PFSbrand's company culture?
"Our culture really revolves around an ownership-thinking mentality and really making sure everybody understands the financials, the income statements, balance sheet, cash flow statements. We really work a lot on financial literacy. Without that financial literacy and the open-book management approach that we take, it's really difficult and I would argue impossible to create an ownership-thinking mentality. Because unless you're teaching them the financials and the challenges of running a business, it's really hard for people to think and act like owners because I think a majority of people in the country don't really understand how business works. So our company culture is all-around goal setting, tolerance of failure, a team approach, and ultimately everybody rowing in the same direction and being aligned on all of our goals in the company and all of our individual goals as employee owners."
Is that hard to achieve?
"I think it is. It's not easy. Open-book management is not easy. It's a constant communication and constant educational process because you've always got new people entering the company. So all of those new people, the reality of it is that they're most likely, in fact 99% of the time they're coming at it from a non-open-book company, and in our case a non-ESOP environment. Both of those environments are very unique. So we don't get very many people to come and work for us that have worked in an ESOP and that have worked in an open-book management company."
Can you talk a little bit more about an open-book management company? What does that look like?
"Open-book is really showing everything except individual payrolls. We share as much information as we can, people have access to income statements, financial sheets. We have every single general ledger code in our company assigned to somebody. So everybody owns those general ledger codes. We have daily and weekly rhythms, huddles and meetings wrapped around key performance indicators and financial statements and things like that. So we make sure that we're communicating, not just on the past results. Ultimately an open-book management company is different from what we would call an open-book reporting. We're not necessarily just reporting what happened. When you're a true open-book management company you're actually forecasting and looking forward to the potholes and the things in the road that are ahead. So again, open-book reporting is rear-ward looking, which we do, but really we spend about 80% of our time looking forward."
You've been CEO for about 20 years. What's been the most surprising aspect of the role?
"For me, there was a big 'ah-ha' moment in 2011 when we really went to open-book management and I read a couple books about open-book management and the fact that people don't understand business. The biggest surprise for me as a CEO is the lack of knowledge of how business really works and what challenges businesses face- even from college graduates that go through business management courses or any type of business school. The real world business facts are simply not out there with most people, and that's even with business educated folks. You get outside of that realm, even with people who went through different types of career paths and college, and those who didn't go to college, the financial literacy is even worse. That's been the biggest surprising fact for me."
Did that play a role in why you wanted to do an open-book management company?
"Yea we really have a unique company core purpose in the fact that we want to help others to become more successful in both work and life. We have used open-book management and a lot of our goal-setting mentality not only to help people in their careers, but we've seen that transcend over into their personal lives. Even self-awareness and some of the self-assessments that we have everybody go through. It makes them more self-aware of not only themselves, but the people they may be leading, with their family, parents, spouses, kids, just the awareness of how everybody is built different mentally has really helped people in their personal lives."
Are the surveys one of the ways you check the temperature of PFSbrands?
"Yea, we do a lot of surveying. In fact, some of the surveys we do say that we do too many surveys. But it's truly an important part of our culture. Everybody goes through an individual 360 degree survey so that any of their peers, anybody that wants to make a comment can. So that's kind of unique, and it's a little bit intimidating for some people, but they get some solid feedback on some things that they could do to improve and if they're being a good team player. One of the other surveys we do internally is based upon the net promoter score philosophy. It's one question...how likely are you to recommend PFSbrands as a place to work for a friend or family member? It's simply 0-10 and the second question we ask is why? We get a lot of great feedback. It's not necessarily about the score but it's more about the feedback. Why did you give that score that you did? So thats's one of the most valuable.
We do another one that's called 'Start, Stop and Keep.' If you were the CEO what would you start doing, stop doing, and keep doing? Or as a company, what do we need to start doing, stop doing, and keep doing? They are three very open-ended questions so we get a lot of solid feedback there. We look for trends because you can always find the one-off there that may not be happy here, but what we do is we put them into buckets and we say, okay, we're starting to see a trend here, so what can we do to educate people on why we can't do that, or can we make an improvement with the company based upon the feedback that we've gotten back from the crowd?
We do quarterly surveys on what's most important next quarter or next year. Very open ended question, what do you think is most important from a company-wide perspective, what do you think is most important? And again, we're just soliciting feedback and trying to get the wisdom from the crowd. We're looking for consistency, so we take that feedback and a majority of the time that's what our leadership team comes up with as the next quarter goal and that's how we wrap up our annual goals as well."
What kind of traits and skills do you look for in your employees?
"Again, the best companies should and ultimately do have hiring practices that are based around their core values, so that's really what we try to do. Some of the things that we look for are competitive people, people that like to win, people that like to keep score. Everything in our company we make as visible as possible. So we have to have people that are comfortable with visibility. We mentioned all the surveys that we do so we definitely have to have somebody that's thick-skinned and can take constructive criticism, who's always looking to do better and improve. If you can't take that feedback, if you can't handle the 360 degree surveys, then it's probably not the best spot for you.
All of those things don't make a good person or a bad person, it really boils down to trying to find the people that best fit the culture that you've developed and ultimately you want to move forward with.
So those are some key things there and I'll wrap that up in summary that really just competitive people. We're a competitive, high-growth, company. One thing I didn't mention was change. You have to be comfortable with change in a high-growth company, because things are always changing."
What advice would you give to someone interviewing at PFSbrands?
"Be honest. If you're interviewing just to try to get in this company and you don't fit those things, ultimately you're going to figure out pretty quick that you're uncomfortable and it's not the right decision for you. I always encourage people to find something that they're passionate about and find a company that they truly enjoy going to work for. When those things fall together, that's when you see people actually excel. We are so focused in our hiring process and trying to make sure that we get the right fit. We put a lot of systems in place to make sure we do that. We don't always get it right 100% of the time, but we're doing a much better job today than we did 5 years ago, and we did better 5 years ago than we did 10 years ago and so on. Like I said, I think the honesty in the interview process is extremely critical and we've had some get through and actually get hired. Two things happened, they weren't honest in the process as they could've been, but they also really didn't like the pace and the change, the visibility, some of those things we do at the company. So that honesty is pretty critical.
We have a subsidiary that's majority owned by the ESOP, so we're a parent company in GRITT business coaching. GRITT is a company where we help leaders develop solid senior leadership teams, we help them implement open-book management if they would like to, we help them create an engaged culture, create the type of culture that they would like, sometimes that even involves helping them with their purpose, their mission, vision, and core values. So it's a company that's highly geared toward creating better cultures and creating better employee engagement inside the workforce."
Did that come from your experience founding PFSbrands?
"Yea. PFSbrands is what we call 'the living lab' of that organization. The entire team is highly engaged in helping GRITT business coaching, develop the systems and the processes and wrap that up into a business model that actually helps businesses take that leap and get to that level. So it's partially speared by PFSbrands and then we also have professional coaches that have worked in different companies and help various companies implement strategic plans and open-book management and various employee engagement tools.
The GRITT acronym is G-R-I-T-T. A lot of people think I couldn't spell but that extra T is actually there for a reason. GRITT stands for goal-driven, responsible, involved, team, and then that last T is tolerance of failure. So it really wraps all that back up to what we started with in the beginning when you asked what was the biggest risk that you took and what did you learn? That tolerance of failure is really the big piece that a lot of business leaders don't teach and in fact they encourage you to hit 100% of your goals. When you're reprimanded if you don't hit 100% of your goals, ultimately what that does for people is it creates a mentality of setting your goals lower so you can hit them, where as we encourage just the opposite. We encourage our employees to try to hit 70 to 80% of their goals. What that does is it allows them to think bigger, strive bigger and ultimately if they don't necessarily hit that goal, that's okay, because we're not going to beat them up for it.
A good example that I always use is, would you rather set a goal of setting 20 accounts, if you're a sales person and you sell 15, or would you rather set a goal of selling 10 and hit your goal of 10? As business leaders we need to encourage people to believe and to think a little bit bigger than what they typically do."
As seen in Ladders and written by Jennifer Fabiano.