July 31, 2012
Peer power
Business owners can fell pretty alone, especially during decision-making time. Many are turning to peer groups, to both get, and give, valuable perspective.
BY SUSAN HIRSHORNGelderman Landscaping, a design/build and maintenance firm in Waterdown, Ont., has been operating for more than 50 years. In the last four years it has implemented major changes, including the addition of a water management and irrigation department, a finance manager, new goal-sharing incentives for each department, and restructured compensation plans.
To help with these and other improvements, Gelderman’s president Nathan Helder turned to a collection of fellow landscapers called The Leader’s Edge Peer Group. The group meets in person and online to compare financial numbers, deal with each other’s burning issues and share best business practices. Since each member of the group is located in a different geographical market in North America, everyone can speak freely without concern that a competitor will be listening.
Helder says their advice and support contributed to his firm’s 25 per cent sales increase during the last four years. “Even more important, my business is now structured to be able to grow to the next level,” he adds.
Although peer business advisor groups are not new, their popularity has surged in recent years, especially south of the border. With business becoming more complex in an uncertain economy, owners are turning to each other for inspiration and solutions. Peer groups can also ease the stress and isolation of business leadership. Says Helder, “There is no reason why someone needs go through life thinking they are all by themselves, making one mistake after another, scared to ask for help.”
Types of peer groups
There are generally two types of peer groups: those where member companies come from the same industry but operate in different geographical markets; and those where members come from different, non-competing industries.
Industry-specific peer groups have the advantage of letting you benchmark your business, so you can know exactly how you stack up against others in your field and how to close the performance gap. The Leader’s Edge is such a group. So is The Garden Center Pier Group, composed of eight garden centre groups across North America. (It’s called the “Pier” group because it was formed on a pier in Seattle.)
With this type of peer group, what works for one member often works for the others, if you make the necessary adjustments for differences in local markets and labour conditions, says Pier Group member Karl Stensson, president of Sheridan Nurseries, Georgetown, Ont. For example, Sheridan’s success with container gardens was emulated by other members of the group and their strategies for sale events and email marketing are working for Sheridan.
Peer groups composed of members from different industries may be tailored to the needs of CEOs (e.g., CEOs International Inc.), female business leaders (e.g., Women’s Presidents Organization) or to specific business issues and challenges. The Centre for Family Business runs the Next Generation Business Owners peer group for family firms in the Waterloo, Ont., region who are in various stages of transition. This group “was a great fit for me because, at the time I joined, I was in the middle of gaining control of my parents’ business,” recalls Dave Wright, president, Wright Landscaping Services. “The transition of power from the founder to the next generation is difficult for both parties. The money part is the easy part. It is all about the emotional side. [The group] showed me other options that may have made things work more smoothly.” He also values the insights that come from exposure to other industries in his local market. His peers include companies in the construction, fitness, insurance, fast food and travel fields. “People are changing the way they buy things and what is important to them. I think that having a foot in a bunch of industries really allows me to see what is happening out there.”
What to look for
Size matters. Peer groups seem to work best when there are at least six but not more than 16 members. With less than six, a variety of perspective might be lacking. With more than 16, members probably won’t have enough time to adequately address everyone’s issues. As well, member companies should be in the same general size range in order to relate to a similar set of problems and opportunities. Stensson says the Garden Center Pier Group is composed only of multiple-store outlets with a similar infrastructure “so we can get accurate comparisons.” According to Helder, the landscape firms in his Leader’s Edge group have revenues of $4- to $15-million.
A good facilitator. A peer group’s facilitator should create an environment where people can be open, honest and comfortable. Equally important, he or she must keep discussions relevant and on track. Jeffrey Scott, a Connecticut-based landscape business consultant who runs The Leader’s Edge, uses a process he calls peeling the onion. “What you do is avoid giving knee jerk responses. Instead you keep asking questions until you get to the member’s underlying issue.” He recalls an instance where a member asked what type of incentive plan would be needed to motivate his operations manager to perform better. But further questioning revealed that the operations manager really wasn’t a good fit for the product mix or the position. The solution? Find another operations manager and transfer the former manager to another position. If Scott had encouraged the group to take the initial question about incentive plans at face value, they would never have discovered and solved the real problem.
For all their benefits though, peer groups aren’t for everyone. First, there are annual fees, often in the thousands of dollars. This might be a barrier for small firms. Also, if you cannot take criticism, a peer group is not for you. Constructive criticism is what makes peer groups tick. So is a culture of accountability. Recalls Helder, “My peer group helped me make the tough decisions that many businesses don’t want to make. They helped me create plans of action and expected me to stick to the plans.”
Although some groups require members to sign confidentiality agreements, opening up still can be tough for some business owners. There is also the question of time. Groups can meet in person anywhere from twice a year to once a month and regular attendance is required if you want your peers to take you seriously.
Groups that meet through video conferencing might save time and travel expenses, but many groups consider in-person meetings essential. Pier One members, for example, visit and critique each other’s stores. “These visits make our staff aware of what others see. As well we get new ideas and the benchmarking we need,” says Sheridan’s Karl Stensson.
He and Helder agree that business owners who truly commit themselves to peer group participation are usually pleased with the results. Adds Helder, “Of all the things that I have gathered from my peer group, the most important concept learned is that we are in business first, horticulture second. We have a common goal: to make money and have time to enjoy life!”
Susan Hirshorn is a writer, editor and communications coordinator based in Montreal, Quebec, and Boca Raton, Florida.