BrightView, our industry’s largest landscape firm, recently posted poor quarterly results. At the same time their CEO left, with no replacement announced.
Did the CEO suddenly decide to leave or was he fired?
Either way, the company has performed poorly. This begs the question:
Is BrightView’s poor performance due to poor strategy or poor execution?
Here is my view, with some lessons & cautionary tales for you.
The mandate of public companies
Investors in public companies want their stock shares to keep rising and the company to keep growing. It’s BrightView’s (BV) mandate.
BV’s strategy for growth is driven by, among other things: competing on price and consistent acquisitions.
Low price high volume: Competing solely on price can be problematic: But Walmart competes on price you may think, why won’t it work for Brightview?
The difference is: Walmart sells products, and they can squeeze their suppliers to out-compete one another to supply high volume products at low prices.
BV sells services and it’s not possible to beat down the price of your labor – and in this inflationary wage environment you must be able to pivot. The lesson here: compete on the value you provide, do better than your competition.
Acquisitions: Another key part of BV’s strategy is buying market share through acquisition; it’s hard to see in their quarterly reports if this approach is working for them.
Acquisitions can be a good way to grow, but execution is critical for success.
If key management and customers flee after an acquisition, the value immediately drops. When conducting as many acquisitions as BV does, it’s critical that they have a good system that maximizes the full potential value of each acquisition.
I will add: Many great landscape professionals work for BV, some of the best in the industry. But are there enough talented green industry folk leading at BV at the top, or is BV being run by accountant-types?
Poor Strategy or Poor Execution.
We see other large-scale companies in our industry that understand how to grow a service business: strong culture, strong leaders, effective branch management and dominating company brands.
These players must also keep their costs competitive, but that is different from competing on price. These leaders invest in their people and culture to attract top talent and drive value for customers.
(Listen to my two podcasts with Mike Bogan to learn more about the right way to grow,)
Only folks steeped in the service industry get this, and BV might be short on those people and too heavy on financial types who are attempting to steer the ship.
Regardless of who sets the corporate strategy, a CEO’s job is to ensure effective implementation. For that reason, the CEO must be able to identify a losing strategy, push back on the board, generate new ideas for better results, and sell those ideas to the board.
The CEO must ensure alignment between strategy and execution:
- Choose the right client niches to target.
- Rally the troops around a vision, mission and core set of values.
- Staff the company with empowered leadership that “gets the business, and its people”
- Ensuring efficiencies of scale, in purchasing, in management systems, in internal services, etc.
- When execution stumbles and strategy is faulty, results suffer.
From the outside it appears that BV is doomed for failure, and will eventually be taken private or sold off in pieces, unless is makes changes to its strategy and execution.
As Mike Bogan pointed out on my podcast (The Ultimate Landscape CEO), companies backed by private equity (and public companies) are driven hard by shareholder results, and that can get in the way of the changes that BV needs to make.
What lessons can you take from this?
1. Correct strategy: Review both your strategy and implementation as you assess your own results and go-forward plans. Make sure you get fresh eyes on your plans, don’t breathe your own exhaust. (Note: That’s where our peer groups are very helpful Leaders Edge peer groups)
2. Compete on value: Competing on lowest price is hard to sustain in a people/service business, you must have a mix of services that results in a healthy margin. No margin no mission!
3. Careful what you repeatedly ask for: A service business is a people first business. If your drumbeat is on “sales at all cost”, it will cost you. Leadership must be consistent!
4. Development KPI: Retaining and developing your key leaders is critical to healthy scaling. Make that one of your KPIs as your management team level, and make sure you (the owner) are developing your direct reports with equal passion.
A final thought on acquisitions:
Acquisitions can work, as measured by retention and cultural fit. But there are large companies growing without acquisitions, so don’t assume that is the only way. In other words, approach them carefully and thoughtfully.
Be willing to walk away, it’s those near misses that just might be your biggest success.
Regards, Jeffrey Scott!