Shared Tech

Source: Technology Digital

Date :2/18/2008 4:22:52 AM

President and CEO Tony J Parella tells Exec how he helped turn Shared Technologies into one of America’s top employers

Written by James Hurley & Produced by Jon Ellingwood

Founded in 1977, Shared Technologies’ endurance in a tough, fast-moving and highly competitive telecommunications market is impressive. The company believes that at the heart of its strength, growth and profitability is its focus on employee empowerment, as well as its commitment to the customer and excellent partnerships with technology innovators.

However, this hasn’t always been the case. When current President and CEO Anthony “Tony” J. Parella took the reins of the firm in June 2002, the company dedicated very little money to development or training of the employee skill set. A background of multiple acquisitions and corporate governance changes had hit morale, and Shared found itself in the position of being yet another telecom company struggling with high turnover rates.

The story of its remarkable turnaround has allowed the company’s workforce to grow from 525 employees in 2004 to over 1,500 employees in 2008. When Allegiance Telecom went bankrupt in 2003, Parella, its co-founder, spun Shared Technologies away as a private company. “It has moved at a pretty fast pace,” confirms Parella. “In my first year as CEO of the company, we did slightly over $100 million in revenue. This year, we are predicting we’ll do slightly north of $400 million. So the company has evolved quite nicely in a three-and-a-half year period.”

Partnership

Back in 2004, as the industry evolved from voice-only to a converged infrastructure, Parella’s initial response to the turnover issue was an attempt to raise the level of skill across Shared’s technicians. “Since we didn’t have the skill set structure at the time to deploy those types of services, initially I dealt with it in the traditional way; you take a technician and you send him to school, spending five or six thousand dollars for a one week class - and then you put them up in a hotel,” he says. “By the time you have done all that you are spending nine thousand dollars for one week at school.”

The cost itself wouldn’t be such a problem if the newly trained employee was committed to the company. However, the company found itself investing these significant resources in training programs for its service technicians who, once trained, would leave for a competitor, doubling the resource loss. “Two weeks after they come out of school they were back in my office with a gun to my head saying ‘give me 15 bucks more an hour or I’m going to go to a competitor,’” says Parella. “It was an exercise in futility.”

This ‘revolving door’ was something the new CEO was determined to halt. What was needed was a strategic investment in people. This meant a dedicated training program that would motivate and retain staff and establish a consistent and reliable competitive advantage for Shared Technologies. The TAP (Technical Advancement Program) it developed was to prove remarkably effective.

Yet the very first step in developing TAP raised a question: who could they partner with when looking to develop the program? The answer was to spring from another area the company places a particular focus on - Shared Technologies enjoys numerous long-term partnerships. One of these established, consistent relationships is with Nortel Networks, whose equipment and services Shared Technologies supplies. Nortel had been working with Global Knowledge, the world’s largest private corporate training provider, since 2000. It developed and delivers all Nortel classroom and e-Learning training in North America.

Transformation

Together, Nortel, Shared Technologies and Global Knowledge worked through a strategy for an infrastructure for a comprehensive incentive training program. Parella cut a bulk deal with Global Knowledge, guaranteeing them a million dollar spend for the first couple of years of business. “By doing that I lowered my costs per course from around $5,000 down to around $1,200 - I substantially cut my costs for training.” Next, Parella redirected his marketing funds and poured that money away from advertising and promotion and into technician bonuses. “There is a two-tier program. When they graduate, they typically get anything from a $750 to $1,000 bonus for graduating. But on the one year anniversary, each technician earns anywhere from $3,500 to $5,000 for getting the certification.”

While any employee training scheme can be praised for raising morale, that can sound rather oblique; the real test comes with the tangible impact (or lack of it) on the bottom line. And in that sense, the transformation at Shared has been remarkable. “It has really transformed the company,” says Parella. “There are certain metrics that I look at that are important to me because they indicate how we are doing. One is customer retention.” The company’s renewal rate for maintenance has been higher than 99.5 percent annually for the last two years. “We have less than half a percent of churn on an annualized basis which is unheard of in our space. Most companies benchmark at two percent churn – and if you have that you’re doing pretty well.

“Another is employee turnover. Our voluntary turnover for the last two years has averaged seven percent in 2006 and six percent in 2007. Our industry typically churns 22 percent of its workforce annually.” The best companies in America, defined by FORTUNE had an average voluntary turnover of eleven percent.

Naturally, FORTUNE recognized the quality of the culture at Shared Technologies, ranking the company 25th on its 2008 list of the 100 Best Companies to Work For. It was also ranked 8th in companies with less than 3000 employees. “They recognized that the culture here is pretty special,” says Parella. Perhaps the greatest benefit to being named by Fortune magazine as one of the 100 best companies to work for is that it reaffirms our belief that the key to the success and the growth of our business lies with our employees. Consistency, reliability, integrity and respect for our customers are the cornerstones on which our business is built - and it is our employees who deliver on this every day.”

Bottom line

The improved quality of the workforce “ripples across the company,” as Parella puts it. Technicians don’t come cheap, so the company’s recruitment costs have been substantially reduced. Training costs have also come down since the investment has already been made. And superior customer retention is a direct link to the confidence customers have in the quality of the technicians. “Strategically, that was a bet we made. We thought we could change the product mix, we thought we could lower the cost of recruiting, we thought we could reduce the employee churn. All three of those things have come true.”

An educated workforce has also resulted in a shift in the balance of the business in terms of its revenue sources. To illustrate the point, in 2003, Shared Technologies spent roughly $20 million with Nortel. Eighty percent of this was on TDM Voice solutions, and only 20 percent was on Converged IP solutions. By last year’s spend, $100 million was spent with Nortel, 78 percent of which was on IP converged and only 22 percent on TDM voice.

“In three years the company has completely transformed itself to become the only truly national converged specialist out there,” explains Parella. “In between, we’ve added a lot of infrastructure which makes us a much better service company but the investment I’ve made in my people’s training has transformed the company. ?That tracks to the bottom line, the top line and it tracks to the customer retention that we’ve enjoyed.”

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