Adizes Pursuit of Prime Award Acceptance Speech
The following is the acceptance speech by Costas Petropoulos, CEO of PETROS PETROPOULOS, for being awarded the Adizes Pursuit of Prime award, which is granted to companies who successfully practice Adizes over a span of many years. The award was presented at the Adizes Convention in India in January 2016.
Dear members of the Adizes Institute, ladies, and gentlemen,
I thank the Professional Council of the Adizes Institute for the great honor conferred upon our Company by its decision to award to us the Adizes Pursuit of Prime prize for the year 2016.
For me, this recognition has a very special meaning, for it crowns a quarter-century long continuous dedication to the application of the Adizes Methodology in my professional career as a manager.
It all started in 1991 – exactly 25 years ago – when we invited the late Adizes Associate, Aurelio Flores, to do a Syndag for our Company. Six years before that, in 1985, I had heard Ichak Adizes describe his methodology at an YPO University in Tokyo. I was very impressed, but I didn’t do anything about it at that time.
Before going into our story with Adizes, let me say a few things about us.
Our Company was founded in 1922 by my late father, Petros Petropoulos. So we are 94 years old this year. We have always been in the automotive industry. We define “automotive” in a very broad way, which means it includes not only automobiles and trucks, but also agricultural tractors, diesel generators, construction equipment, fork-lift trucks, outboard motors, two-wheel vehicles, lubricants, batteries, etc. During our history, we have been variously in all stages of the value chain, including design, manufacturing, assembling, modifying, distributing, and financing. Since 1999, the Company has been listed on the Athens Stock Exchange.
By 1990, our Company had gone through an 18-year period of go-go growth, during which sales increased six fold, but profit hovered around zero. There was a lot of conflict in the organization. Our monthly meetings were dominated by conflict of sales against marketing, sales against accounting and vice-versa, sales against production and vice-versa, sales against support functions like logistics and vice-versa, and practically everybody against everybody else. It was a mess.
I took the initiative of recommending that we invite the Adizes Institute to help us. My brother and partner, who is a strong “PA,” asked for proof of tangible benefit from this (substantial, for our size) investment. I, being primarily of an “EI” mentality, of course had difficulty in defending my recommendation, as all “E”s do! A trusted colleague (a strong “I”) asked me “are you sure this will benefit us?” I took the risk and replied, “Yes.” This colleague helped to convince my brother. So we started the process in early 1991.
It is notable that some time after the Syndag was completed, my brother and partner, John, thanked me for insisting on my recommendation to invite Adizes! This is of special value if you know what a tough cookie John is.
After the first and second days, my brother and I experienced difficulty sleeping at night. The picture of our Company that emerged was totally different to what we believed it to be. We thought we were leading a dynamic team of first class race horses. It now appeared that our horses were tired and discouraged.
Under Aurelio Flores’ guidance, we re-structured the Company into autonomous business units, where Capi was properly rebalanced and accountability better focused. A collateral damage was that some of our key managers resigned, perhaps because the clear accountability that resulted was too much for them.
We also instituted the Corporate POC, and a POC for each business unit and for each support department. These POCs are still operational today, after 15 years. PIPs have dwindled from a fairly large number (40-50) to two or three now. We wonder what this means.
We worked hard on MT&R.
Greek culture does not promote Trust and Respect. There was a lot of doubt when we set out to establish MT&R in our organization.
Ichak Adizes teaches that it does not matter if mutual respect resides deep in the mind and soul of the individual. We have no way of knowing or measuring this. But it doesn’t matter, he says. What we are interested in is BEHAVIOR – that we can see, measure, and control. So we started punishing disrespectful behavior. For example, one manifestation of disrespect is to interrupt someone while she is speaking. So I, then CEO, used a wooden gun I had bought from a street peddler in New York, which fired rubber bands. I carried it to every meeting and declared that I would shoot only a person who interrupted. I made it clear that you were allowed to say anything, shout, even curse, but you were not allowed to interrupt. Pretty soon, interruptions, a frequent phenomenon in Greek public and private life, all but disappeared from our Company.
Another way to show disrespect is to be late at meetings. We follow religiously the Adizes practice of doing as many pushups as minutes of tardiness. The rule applies to everybody. I’ve had to do many pushups. At the end of the pushups, the rest of the group applauds, thus accepting the apologies of the latecomer.
It has worked, thus confirming Aristotle, who made the astonishing claim that virtue is not an act, but a habit. You have to practice virtue in order to become virtuous!
We also worked on building Trust. First of all, we declared that ours is an Open Book Company. Financial Statements are true, there are no hidden items. Everything is known by our trusted employees. For example, we discuss the latest financial performance at all POCs. Secondly, we set the rules that apply to everybody without exception, including the Chairman and CEO. And we implement this policy religiously. This is very unusual for the average Greek family business.
For example, when I recently described to a friend, a prominent Greek businessman, the institution of “bitching day” in our Company, he nearly had a fit! Let me explain.
In our Company, managers’ income is based mainly on the financial results of the business unit they run. For this reason, they have complete freedom in managing their expenses. The only part of their expenses that they have zero freedom on is the part that refers to the expenses of top management (CEO and Chairman) and of the accounting department, both of which are allocated to them. Aurelio Flores suggested, and we agreed, that although the business unit managers do not have the right to reject these allocations, they should have the right to complain about them. This is done on “bitching day”, in November every year, after the allocations for the next year have been announced. During the bitching meeting, we have made it clear that it is legitimate and indeed desirable that business unit managers question every line of the allocated expenditure budget (which we call “Red” expenses). During that session, the CEO, the Chairman, and the Accounting Manager have to defend why each expenditure item is necessary for the Company’s survival and growth.
“Ha!” said my friend. “You mean that I would have to explain to my employees why I have the expenses of my yacht and my house maids on the Company books? This is ridiculous!”
But bitching day has contributed to the building of Trust in the Company. Incidentally, it has also helped us keep overhead down. In the beginning, we had a lot of complaints. But as we became more and more careful in constructing our budget, complaints have dwindled to practically zero.
As you know, Greece has gone through a major economic crisis after 2010. During this crisis, our Company has had to institute, for a limited period of time, part time work. During this, and up to now, the CEO and Chairman reduced their salaries to €1 per annum. And of course, the salaries of business unit managers have been automatically reduced, because of the reduced financial performance of their business units.
All of this has contributed to the building of Mutual Trust in the Company.
Trust can be costly. For example, some time ago, an aggressive competitor started hiring our sales persons by offering very much increased salaries, because they knew that our sales force had a lot of valuable information: They knew our costs and our whole client base, including pending quotations. We started losing orders that were about to close. Things became so bad that at some point, we wondered whether our policy of complete trust in our sales people should be changed. We finally decided that the benefit the Company got from granting trust far out-weighed, in the long run, the short term risks of leaking information to competition.
Today, if you walk through our Company, you will see in the corridors confident young women and men who evidently respect themselves and their managerial profession, with a look of optimism on their face. It is joy for me to walk through our Company. And we owe this, largely, to Adizes.
After 1992, a period of sales stability ensued, with strong and increasing profitability. Sales dropped from about €70 million in 1992 to €55 million in 2002 but profit climbed from €0.8 million to about €4-5 million in 2002. It was our period of Adolescence. Predictability went up, as our budgets came much closer to outcomes, and systems were adopted in many important areas, like determination of salaries based on job values and credit control. Our cash flow improved tremendously. The Company was in control.
E returned after 2002. Sales began to rise rapidly as new businesses were added. By 2007, sales rose from about €55 million in 2002 to over €130 million. Profitability continued to climb to record heights, a sign that the Company continued to be under control. Prime had arrived!
Then in 2010, the big crisis arrived in the Greek economy. Between 2008 and 2012 we saw almost all our markets drop by an average of 80%! But because the Company continued to add new product lines to its portfolio – a sign that E was still very much alive – sales only dropped by about 50%. In 2015, sales compared to 2008 were only about 35% down. In the same year, 65% of our sales came from product lines we did not have at the outset of the crisis in 2009. And our profitability continued to grow, predictably. A confirmation that the Company continues to be in Prime.
I have described to you how our Company, with the help with Adizes, has moved from Go-Go to Adolescence to Prime. I think it is a textbook case proving the wisdom of Ichak’s insights into the life cycle of corporations.
I would like to conclude by sharing with you some thoughts on Adizes. I believe that Adizes is to organizational understanding and treatment what Freud has been to individuals. He led the way towards a totally new direction in diagnosing and restoring health to social organizations like the corporation. Like most great innovators in history, the true value of Ichak’s contribution to the art and science of management will be appreciated many years later. And recognized it will be. I consider it a great privilege and luck that I have met and learned from Ichak in my lifetime. I consider him my teacher and, in the ancient Greek tradition, I feel gratitude and love for him.