Shownotes
Working in a very small office supply retail store in high school back in the mid ‘80s, Mark Newhall, founder and CEO of Execution Specialists Group, ESG, learned early on how businesses operate and how you could, as a partner to them, bring value to the products and services. Now, as CEO of a management consulting firm, he shares the day deals closed, they were the ones rationalizing the distribution footprint, putting the distribution systems, warehouse systems and order management systems in place, and training the workforce on new things. He says they’re driving not so much on the strategy of the company, but on how to execute in line of the company worldwide the tenets of the strategy.
Mark Newhall, CEO ESG, One Of America’s Best Management Consulting Firms (2nd Year In A Row)
We’re fortunate to have Mark Newhall. He’s the Founder and CEO of Execution Specialists Group, ESG. He was most recently recognized, and I would let him talk about the recognition and what it means to him. Mark, thanks for taking the time.
Thanks, Bob. Forbes in 2016 surprised us with recognizing ESG as one of America’s best management consulting practices. It was a surprise to us. We didn’t apply for it. We didn’t even know it particularly existed in a myriad of Forbes lists that get put out. The way they went about identifying these companies was through talking to some of the largest companies in the United States, “Who are the big firms that you use? We’re looking for advice, support and advisory services. Who are those boutique firms that you count on and they make their first pass through?” Apparently we came up enough for where they said, “We want to go deeper and understand who this firm is.” They go back to the clients that we’ve worked with and talked a lot about the value that we deliver and how they worked with us. They go talk to our peers. “What are your thoughts on working with these ESG?” There are people in the value that they deliver. They had roughly a dozen or so categories. Ours was on business strategy. They named somewhere around fifteen or so companies. We’re proud to make that list in 2016 and to make it again in the spring of 2017. It’s a great job by our people and a big deal for them to be recognized for their work.
You talked a little bit about pre ESG road that you traveled. Let’s dig into a little bit about your time prior to ESG.
What’s the first thing you remember as a child? Sometimes it feels that way. I worked in a small office supply retail store in high school back in the mid‘80s and that was before Staples superstores, the internet, fax machines, email and things like that. I learned pretty early on in school and then working for this business services company, how businesses operated and how you could, as a partner to them, bring value to the products and services. We sold typewriters, early Wang word processors, Canon photocopiers and all other printing services. I stayed with that in high school, stayed with that after high school, became a full commissioned outside salesperson and sales manager.
I found my way to a national company that had a smaller operation in Boston. Shortly after, I joined the company Corporate Express which was founded here in Colorado in ’86. They were in the process of going public. They were intending to use the proceeds from that public offering to begin acquiring small and regional office products companies. We were basically their first foray into Boston and Northern New England area. At 25, I became their youngest division president. It wasn’t anything particularly impressive. It was a small $6-million division of what was a fast growing company. They taught me at that young age how to move in from sales management to general management and how you go buy companies. I spent a lot of time on the deal team in the mid ‘90s and went back to Boston. We bought nine companies, over $100 million worth of revenue in about eighteen months. The responsibility and the action around how do you put those nine companies together, previous competitors, a lot of overlap with sales, product, facilities, fleets, competition programs, all those things, I found that that was probably the most fun that I had up to that point.
We sold the company in ‘99 to a Dutch firm. We had a new CEO. He made the rounds. He came back to me after that and said, “I’ve been all over the country and here in Boston. You’ve done an exceptional job of creating the culture we want, deploying the systems, the processes we want, pulling these nine companies together. It’s a model we want to repeat. I want you to come join my team.” For the next ten years, I lived on an airplane. Worldwide, the company, through that same period, completed close to 600 acquisitions, 28 countries, 40,000 people, many different lines of business and trying to create a global value proposition for business customers and businesses out there. We built a large internal consultancy that we were the people that were there the day the deal closed. We were the ones that were rationalizing the distribution footprint, putting the distribution systems, warehouse systems, order management systems in place and sun-setting the old stuff, training the workforce on new things.
When that work was done, it was, “How do we keep these competencies and take on the tough projects?” Early day CRM with companies like Salesforce.com, we were one of their first enterprise customers, first people, to bring it into a contact center. How do we consolidate 30 different customer service centers in the mid-2000s? Not disrupt the customer experience. How you certify the company was ISO 9001:2000 quality systems. We did that. Then I spent a few years in Amsterdam, working for our European President and eventually the Chairman of the company, driving not so much the strategy of the company but how we execute in the line of the company worldwide to the tenets of the strategy. We finished up in 2008, it was quieter at the end of a ride. Fifteen years from that are those early days of the IPO and roughly $40 million to $50 million in revenue to sale to Staples at $8.5 billion and a whole lot bigger fifteen years later. We felt proud of the work we did to build a world-class company and something that is a big part today still of what Staples is all about.
The day after the deal’s done, what was going through your mind that next morning?
In fifteen years, from concept to one of the world's biggest companies that does what we do, I was proud of it.
When Staples bought the company? I had been hundreds of times over the person that found out their company got bought. Immediately you start worrying about my job, my benefits, my time, my contributions, my compensation and all those kinds of things. There I was, that person, for the very first time and the only time in my career, I had a rough ten minutes and then I sat back. Staples was tremendously fair. They were transparent. “You’re the strategy guy. We didn’t buy your strategy. We need to clear out what got us here. It’s what we bought but we want to take it to a different place.” I was able to rationalize that pretty well. I looked at the fifteen years. We built a hell of a company. The people that I got to work with over those years, hundreds of leaders and lots of executives and investors, if you stepped back of it and you said, “In fifteen years, from concept to one of the world’s biggest companies that does what we do, I was proud of it.” I looked at it as this giant project because that’s what I had lived in for so long. I had no intention of starting a business. I said, “It’s been a ride. I’m going to sit back, take some time, and figure out what’s next.”
There’s that period of time, traveling, entertain yourself and figure out that you do not have to be somewhere until you choose. You get the thought process to start ESG. The Execution Strategy Group struck me. That says a lot about exactly what you had in mind to do. Talk about the thought process of getting ready to go back out and start ESG.
I have to admit I did not have an a-ha moment. I did not sit back and say, “I’ve got an idea. I need to write a business plan. I need to write a pro forma. I need to go find investors.” I didn’t do any of that. I took a month after finishing Europe that summer of ‘08. I got on my motorcycle and I rode about 4,500 miles all around the Pacific Northwest and came back and it’s like, “That was fun.” Now it’s September of ‘08 and I said, “I’m going to go down to that timeshare I bought in Mexico and never use because I was working too much.” I played a bunch of golf and was down there for few weeks and had a voicemail in October while I was in Mexico. I heard this quiet voice on the phone and a person introduced himself and said, “My name is Frank and I know this person at Corporate Express. He’s on a board with me. I run a food service company. We’ve made some acquisitions and we need to put them together. We’re not sure where to start and we thought you might have some insight for us.”
I didn’t do anything with the voicemail for a few days. I found myself in an internet café because times were different. We didn’t have our smart phones then on a beach in Mexico. I looked up who this person was and who the company was. He was the CEO of the largest food service company in Canada. I called him back quickly and he invited me to their US headquarters. I flew from Mexico through Denver, got a suit, went up and saw these guys. I didn’t know what I was getting myself into. The whole discussion was, “Why don’t you join our team as an employee?” I had a real sense of resisting that because all I had ever known was pens and pencils, office products, and things like that. It was flattering. It was a tremendously impressive company, 100 years old, fourth generation, family owned, family managed. I got to meet the CEO, the chairman, some board members. I reiterated, “I don’t think I need to join as an employee because I won’t bring expertise in your business.” They were quick to say, “We’ve got plenty of people around here that know the business. What we need is some expertise. Where do we start putting this together and where do we do it in a way that’s thoughtful for our customers, our people?”
I respected how caring they were about that and I said, “Why don’t I just come in and take a look?” They said, “Great. You can be a consultant. We don’t like consultants but we’ll let you be one.” It was literally around Thanksgiving, I was on the Secretary of State’s website and paid my $25 and searched some names. When it comes down to it if you’re going to have a consultant, what did I value? Having bought $100 million worth of consulting at Corporate Express over the years, I valued an ability to execute, not a firm that would tell me here’s what you should do. I had a place, but I was always interested in third party support that could help me go get it done and fill in the gaps where I don’t have the expertise. I came up with that name; it was a mouthful. Execution Specialists Group scares everybody so we shortened it to ESG.
We love the question, ten years later, what does it mean? People have an a-ha moment when you get down to it. Strategy isn’t much of anything without an ability to execute. The name has served as well over the years. That’s how it started. It was about five days into that engagement with that first client, that’s where I had my a-ha moment. Sitting with their executive team, looking at the challenges, very familiar P&L client distribution challenges that I had faced for many years on the operating side of the business. This aspiration to, “We’ve got to go after it. We’ve got way too many systems, our customers are confused. It’s expensive. Where do we dig in?” I realized there’s a business here. The skill sets that I have and what the people that had worked with me had would potentially be valuable. We went all in with that first client and they were our client for seven years on different things. It felt much like the work we had done at Corporate Express. It’s a fine company.
You’re doing the consulting and you’re able to look top down and dig in. What was the decision to add folks to your company?
They gave me a seat at their table. They were generous. I listened to the leaders of the business, immersing it. They were touring me through warehouses and I was riding with their drivers. I was meeting their customers. It was fascinating for me to, all of a sudden, for the first time, be in a different industry and to see the commonality. They have me sit in on their leadership team meetings. I would observe. I would do my part when we were talking about integration. I remember down more than one occasion the CEO nudging me. He’d have me sit next to him and say, “You’ve been listening to this problem for twenty minutes. What would you do, smart guy?” I said, “I would probably get someone that knows how to get you out of the situation you’re in or could bring some outside perspective.” It would fall on the table. It was really quiet. I remember him saying, “You know anybody?” “Sure.” That was the first quarter of ‘09. Staples were taking costs out as often happens after an acquisition. A lot of the costs were that 120-person team that I had built inside of Corporate Express. Those people were suddenly available as were many people in the first quarter ‘09. I was able to attest to that client, “Here’s the person that I’ve worked with for ten years and this is where they’ve dealt with that problem before. I can attest to their ability to take a look at this problem and give you a sense of what you might want to think about and potentially help you get through it.”
That first time we did that is exactly how we deploy resources today, ten years later. It’s the same model. We started to grow first through bringing on five or six people from Corporate Express, Staples, and brought them into ESG. Just about every one of them is still at the firm today. It’s our leadership team. What I found appealing was the tremendous amount of “been there, done that” experience early on. Those same people I was selecting, the reason we selected them at Corporate Express to join our integration team in the first place was they were what I like to call board operators. They were good at operating businesses, but they loved all that transformation and that chaos that we lived through at Corporate Express with all those acquisitions. They would go in and optimize the business or a function, look around for what’s next, where’s the next hard problem. ESG became a great platform for those types of people to live in because as the client base started to expand and the industries that we worked in started to expand, familiar problems, unfamiliar territory, and the ability to make a difference quickly is the common thing that all of our people today have in their DNA, that love of fast paced. A lot of change, optimization and how do we drive performance in a particular business through a particular problem?
We talked about the acquisition and mergers side of the house. You also talked about transformation. Before we get too far down the road, I always ask, “What’s your business and who you serve?” You’ve talked a lot about it, but maybe we focus toward that transformational work that you guys are doing as you describe what you guys do.
When you look at the types of companies that we work with, they have also in their DNA a growth through acquisition. They’ve been built in distant past through combining companies. Walmart’s a good example where they’re not necessarily acquisitive today, but built their business on a tremendous amount of acquisition and consolidation through the years. We’ve got clients that aspire to be acquisitive. They’re getting ready. If we’re going to go write big checks for big companies, what’s that playbook look and how do we make sure we don’t squander the investment or disrupt the business? We have other customers that have recently made an acquisition. They need to make certain that they hit their synergy targets and whatever they committed to the street, the investor community, the private equity firm, whatever that is.
Management Consulting Firm: When you look at the types of companies that we work with, they have also in their DNA a growth through acquisition.
A lot of our action, if you will, is in that immediate M&A or post M&A environment. The transformation work is part of M&A integration. We also have these clients that haven’t brought anyone in ten years, fifteen years, but they didn’t get through the acquisition or the integration work quite right back when they did the work. They perhaps have become a house of brands, and as margins are under pressure, as economic headwinds take their toll, as the business landscape changes, as pressures come from new competitors, we all know who those are, they have to go back and reconcile and rationalize redundant system for redundant platforms, master data, master product data, or big leftover holdover challenges for companies.
They make a decision often after a strategic review. A new leadership team or a new CEO comes in and they say, “It’s time. It’s time for us to get after this. We have to deliberately get after it. We have to make the investment to get after it.” Those are our best clients. The ones that realize, “We don’t want to live on for warehouse management systems forever. We can’t afford it. We can’t run our business like a franchise. We can’t deploy best practice when we have to interpret a concept for different ways across the network that might be 50 distribution centers.” That’s the work that we do, understanding how to select the one that will survive and then how to move all of those systems from the other three, for example, into that one, always thinking about not disrupting customers, not disrupting business performance.
If you had a prototypical client and you’re brought in by referral or however you come into the company and said, “We have a particular challenge,” what’s your typical approach or steps to identify and then start to execute the solution?
One of the things that we have developed over the years of our work, both at ESG and Corporate Express, for lack of a better term, is a success framework. Once we have earned or developed a rapport with that senior executive sponsor, we shift the conversation to what we often called a little bit of the Columbo Approach. “Would you agree then that success of whatever it is to which you aspire would include these types of things? It’s transparency, it’s alignment, it’s clear governance and decision making. It’s predictable plans, it’s disciplined execution, it’s repeatable results where necessary....
