June 2024
In This Edition | High-Performance Teams
"Crafting Fragrance Leadership with Strategy, Sustainability, and High-Performance Teams"
Leader’s Corner: | Edgar Huber - NEST New York’s Sweet Scent of HPT Success |
Howard Guttman: | Your Private Equity Portfolio: How Well Is It Being Led? |
Video: | “Shifting to a High-Performance Culture” |
Edgar Huber
Chief Executive Officer
NEST New York
Edgar Huber is Chief Executive Officer of NEST New York, a rapidly growing, leading fragrance brand offering a full range of innovative and award-winning products for the home and personal care, including fragranced candles, diffusers, soaps, lotions, perfume, body care items, and fine perfumes. All are designed to elevate mood and capture the senses through scent. NEST New York operates primarily in the US and is expanding internationally.
Leader's Corner: |
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Edgar Huber, NEST New York |
Let’s say you’re on an elevator, and a fellow passenger turns to you and asks, “What is NEST New York?” What do you say?
We are the market leader and experts in home fragrances and are also known for our very sophisticated fine fragrances. We operate primarily in the US but are beginning to operate in other geographic areas, focusing first on the UK and then, in order of priority, the Middle East, Australia, and Latin America.
How do you differentiate your products from all the others on the shelf?
We offer customers the best value for their money. Our candles and fragrances are produced in Paris by the world’s finest fragrance perfumers, and they contain the highest concentration of these fragrances. Our price positioning is very competitive with others in the premium-fragrance category.
Watchdog groups have criticized the fragrance industry for not being sufficiently environmentally friendly. What are you doing to make sure your company is “eco-friendly?”
We take the issue very seriously. Our fragrances are 100 percent safe and FDA approved. Our new products are rigorously tested and use only top-quality, FDA-approved ingredients. Our packaging is high quality, and we use a high percentage of recycled material. We even offer refills so that customers don’t have to rebuy the packaging, which is both more economical and more environmentally friendly.
How long have you been CEO of NEST NY?
It’s been one year. I joined NEST NY on March 1, 2023.
And your biggest surprise?
I was surprised by the extremely high quality of our products and our consumers’ high engagement and loyalty. The other surprise was the power of our brand! We have a terrific reputation in the markets we serve.
What are NEST NY’s primary distribution channels?
NEST.com is a highly successful e-commerce site. Our products are also sold in over 2,000 high-end US boutiques and department stores, as well as in Sephora and Ulta.
Where, strategically, do you want to take NEST NY over the next several years?
Our goal is to increase the market penetration of our fine-fragrance business and develop it internationally. We also aim to lower the costs and increase the profitability of our direct-to-consumer channels. We want to develop high-performing teams and ensure that NEST NY is a great place to work.
How about your top day-to-day operational challenges?
We need a better sales infrastructure, one that focuses more on improving our in-store execution. We also need to improve our IT systems to support planned growth. Third, we must build the infrastructure and back-office capability for the international expansion of our fine-fragrance business.
You mentioned high-performance teams (HPTs). What lit the high-performance spark for you at NEST NY?
The GDS focus on performance is crucial. When I arrived at NEST NY, I sensed a defensive culture, a “we know better than everybody else” attitude. We had to refocus squarely on team performance rather than individuals being defensive or ego-driven. The only important question needed to be, “Is this good for the business?” It was also very important that we align everyone in the company, so we all walk in the same direction and stay focused on our strategic targets. This was not always the case. As we grow as a company, we are evolving from a smaller, founder-focused business to a more significant one. The high-performance team approach will help us to scale up the business and manage it professionally.
If I were a fly on the wall of one of your team meetings, what differences would I notice now that you’ve been through the GDS alignment process?
Team members are much more engaged and empowered. You would see greater delegation and fewer bottlenecks in decision-making. The team is now much more performance-focused and focused on what is good for the company. You would also hear the phrase “in the spirit of HPT” repeated regularly by team members. We’re evolving toward becoming an HPT. We’re not there yet, but once we become a fully functioning HPT, it will completely change the game.
When did you start the HPT journey at NEST NY?
I assumed responsibility as CEO in March, and we held the first HPT session with our senior leadership team in the fall. NEST NY is a private equity-owned company.
Have you involved your company’s founder in your HPT work? And has the HPT approach helped you better communicate with the founder?
I’m fortunate to have a founder who is genuinely interested in learning and evolving. She’s not someone who has held us back in our journey to scale the business. It might not always be easy for her. The first HPT session was very tough for her because she received a lot of feedback, which she was not used to. The first day, in particular, was emotionally draining, but she went with the flow and now really appreciates the progress. She sees that everyone is growing, including her, and the company is moving in the right direction. Our founder has made every effort to make HPT work.
Can you point to any bottom-line impact of your HPT journey?
Decision-making time is much shorter. We are much more disciplined in how we execute. We focus on growing our top line professionally. I also think that all the financial KPIs are managed in a much more disciplined and results-focused way. I’m convinced that the top team’s focus on results and quality execution has led to our impressive performance.
If one of your peers in the fragrance industry asked if you would recommend the HPT approach, what would you say?
HPT is a game-changer, so I would tell the CEO that I’d highly recommend taking the same HPT journey that NEST NY is taking. Leading a team with the right skills is important. But leading a team of players with both the right skill set and the right mindset or attitude is the real challenge. The HPT approach helps to meet that challenge and, in the process, drives success.
Your Private Equity Portfolio |
How Well Is It Being Led? |
by Howard M. Guttman
Think of private equity investment firms as the high-wire act of capitalism. Sure, executives in such firms analyze, evaluate, and conduct research on target companies in order to mitigate risk. But, ultimately, their investment decisions are leap-of-faith bets on companies with a limited track record, however compelling their presenting idea. Unlike when dealing with public companies, there are “unknown unknowns” aplenty with private equity investments.
When it comes to managing their portfolio companies, PE
firms face five key challenges:
1. Operational improvements-Identifying and addressing operational inefficiencies, restructuring and delayering, and streamlining processes.
2. Financial management-Involving managing money in the short term. PE firms need to manage cash flow closely, optimize working capital, and ensure compliance with financial-reporting requirements.
3. Risk management-Effectively managing and mitigating risks within portfolio companies. This includes identifying potential risks, developing risk-mitigation strategies, and monitoring the implementation of risk-management measures.
4. Exit strategies-Identifying the right exit strategy and timing, including evaluating options ranging from IPOs to mergers and secondary sales.
5. Leadership-Identifying players with the “right stuff.” Is the CEO an old-school, command-and-control leader? Or have they embraced—or are willing to embrace—a new model of leadership in which everyone, on every team, is a leader?
In our experience, private equity companies rarely do a good job when it comes to deciding whether to keep the CEO in place or select a new CEO to run a company in their portfolio. Whether you lead a private equity portfolio company or one that is privately held or public, the hierarchical nature of most organizations complicates dealing with leadership issues for CEOs and leaders at all levels. The hub-and-spoke, top-down approach retards rapid decision making, information flow, and cross-functional accountability and idea exchange.
In our consulting with private equity firms, we work toward building horizontal, high-performing teams in portfolio companies. This approach accelerates decision making; breaks through silo protectionism; broadens accountability to include holding peers, team leaders, and even top executives accountable for results; and minimizes conflict and noise in the system.
Here is how John Pouschine, managing director and cofounder of private equity firm Pouschine Cook, describes the impact that the high-performance approach has made on the portfolio teams his firm manages:
They’re far more open about discussing the decisions they’ve made, and they often ask for advice before taking action. They frequently turn to us, as members of their Board, when they feel a need to have a dialogue around issues….The value added by a high-performing team is amazing….Over time, a high-performing team can easily bring in twice the revenue and three times the profit! The scope of the change is that great.
It all begins with the CEO. It’s why I advise our private equity clients to first pay careful attention to the CEO of each of their portfolio companies. Is each:
A high-performance leader with all the relevant attributes: everything from the ability to build a horizontal team of leaders to being able to foster across-the-team accountability and candor and to put in place ground rules for managing conflict and decision making?
Coachable—able to accept feedback and change behavior, if needed?
Adept at leveraging resources—financial, human, and technological?
Aligned with the private equity investors on the business fundamentals—ROI expectations, value creation, period for holding the asset, speed of delivery?
A collaborator who can work seamlessly and transparently with the private equity firm and its resources?
More at stake for the success of the company than focused on ego gratification?
Able to balance compliance with the private equity plan with creativity and out-of-the-box thinking?
Capable of leading a hurry-up offense to deliver rapid results and lasting value?
Ditto for everyone on the senior team.
Founders of portfolio companies can present a special challenge. They typically are technical people, with low affiliation needs and outsized egos.
To test their ability to change their preconceived notions, I ask them: “Give me an example of an instance when you were committed to your point of view but then gained information that challenged that commitment and caused you to change course."
Just as within teams, effective private equity oversight of portfolio companies hinges on putting in place ground rules for managing the dynamic between the private equity firm and the portfolio CEO. These should be made as explicit as possible.
For example:
Which decisions are to be made unilaterally by the portfolio CEO and which must be made collaboratively?
What’s the cadence of communication in terms of frequency and in terms of substance—reporting deviations from plan, transparency, confidentiality, and the like?
What resources are available to the CEO from the private equity firm and how can the CEO access them?
The less daylight between the private equity firm and the CEO, the better!
Private equity firms are under time pressure to have their investments show rapid results. Executives at private equity firms should look for these early indicators that can demonstrate whether they have the right CEO at the helm:
Is a high-performance alignment of the senior team on the CEO’s must-do agenda?
Has the CEO built solid relationships with executives in the private equity firm and within the portfolio company he or she leads?
Has the CEO remained focused on executing the strategic plan?
Does the CEO openly confront issues that arise with the private equity firm?
Has the CEO demonstrated an ability to make tough financial, product/market, and people calls?
By applying the same rigor to the leadership and human side of the portfolio companies they manage as they do to financial and other challenges, private equity firms can ensure that high-performance ways of working are embedded throughout their relationships with their portfolio partners.
While equity firms’ executives will continue to be high-wire performers, the horizontal, high-performance approach will at least provide them with the needed safety net.
Shifting to a High-Performance Culture |
by Howard M. Guttman
75% of culture-change efforts fail. Howard Guttman's video changes the odds.
400 Valley Road, Suite 103 Mt Arlington, NJ 07856 Call us @ 973.770.7177 |
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